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Weightmans evolve Practical and legal implications for the supply chain post COVID-19

Businesses are now having to look at their supply chains as all sectors of the economy adjust to business post-lockdown.

Even if you see it as ‘business as usual’, some of your suppliers and customers will not. Any change to ways of working can introduce risk as businesses adapt. Following on from our report into the future of the supply chain and our lockdown update, we have set out some of the practical and legal issues businesses will face, whether your operation has been resilient or if you have had to find a new way of transacting altogether.

  • Real estate and infrastructure
    • Effective sanitisation and maintenance strategies for re-opening and operating sites.
    • Comprehensive appraisal of safety critical processes to ensure future claims defensibility is as good as it can be.
    • The effect of social distancing on operating capacity; what does normal look like under current guidelines?
    • Lease renegotiation? Move to turnover rents for leasehold property?
    • Note the moratorium on eviction ends 30 September 2020.
  • Tech
    • Consider the need for ongoing investment. Do the gains from some tech (e.g. IoT, smart and live contracts, process automation) warrant capital investment now?
    • Ensure information held on customers and employees (who may be working remotely) is held and processed in a compliant way.
    • A new way of working represents risk – are those risks covered? Do you have insurance that would respond to these new risks?
    • Increased investor and consumer expectations and technological advances have all pushed the agenda of greater transparency in corporate responsibility; can this be demonstrated up and down the supply chain (e.g. have modern slavery concerns been addressed)?
    • Telematics & Vehicle Technology: Driver Behaviour. There is a wealth of data but this comes with potential risks to the business if not reviewed and acted upon.
    • If you are relatively new to e-commerce and whether you are selling direct to consumers via your own website or through a third party platform, you need to ensure that you comply with the appropriate contractual obligations for the software or platform you are using. Charging models for the use of third party software need to be understood and ideally linked to usage. This is in addition to considerations around implementing new versions and updates for software and ensuring security arrangements (IT security, personnel, security of servers and data security) are in place - any payment platform needs to be PCI DSS compliant.
  • Employment
    • Employment legislation around statutory sick pay, returning from furlough, redundancy, holiday entitlement; are you compliant?
    • Is your current operation ensuring employee confidence, security and wellbeing? Can you demonstrate this?
    • The end of free movement in the EU and the availability of appropriately skilled workers in various sectors will create further pressure and possible price increases up and down the supply chain.
  • Regulation and compliance
    • Review impact of UK global tariff replacing the EU’s common external tariff on 1st January 2021, increased complexity around import/export processes arrangements arising from any Brexit deal.
    • Fitness to Drive - temporary removal of D4 medicals.
    • Agency drivers are less prevalent nowadays due to regulatory requirements but if used in times of seasonal demand, companies are reliant on the agency to provide someone suitably qualified. The risk comes from not having control of the relationship between employer and employee; is the agency driver aware of and adhering to the company driving policies and procedures? Some insurers will not insure operators unless the proportion of agency drivers used is below a certain proportion of the overall number employed.
  • Customers
    • If you employ a third party logistics provider, changes in supply chain practice such as onshoring/just in time/storage etc. may affect the requirements from them and of course will have an impact on your contractual relationship.
    • The repurposing of the existing supply chains to accommodate a move to larger digital footprint (with implications for real estate).
    • Are online T’s & C’s fit for purpose B to B and B to C?
    • Contracts which are to be renewed should be renegotiated with possible future risks e.g. another lockdown, a scramble for appropriate storage space.
  • Suppliers
    • Coronavirus has shown that supply chains have to be innovative and collaboration through the supply chain will ensure future business successes. Are your contracts flexible enough to accommodate such requests from suppliers?
    • The drive for onshoring and de-risking the supply chain will increase pressure and highlight the importance of the efficacy of the supply chain which is utilised. An assessment of risk in shortening and simplifying it should be undertaken.
    • Wherever you sit in the supply chain you will need to assess suppliers’ contingency and continuity plans so that services can continue to be provided during events such as fires, floods, pandemics and terrorist attacks. Force majeure clauses will need to be reviewed carefully to ensure that they do not undermine a contingency plan by allowing a supplier to rely on force majeure instead of following a continuity plan. Force majeure clauses should be carefully reviewed in light of COVID as they can present a risk or an opportunity to exit.
  • Financials
    • Ensure you are maximising use of government assistance where needed (this can be by way of debt finance or equity fund raise under the government schemes – although note there are strict deadlines on when these schemes are available).
    • Manage cash flow to ensure ability to repay.
    • Review banking agreements for any flexibility.
    • Look at existing assets to potentially raise finance against.
    • Renegotiation of terms with suppliers or bank.
    • From 1 October, creditors will again be able to issue statutory demands and winding up petitions against debtors without restriction. Previous COVID-related concessions on what would previously have been classed as wrongful trading will also come to an end on that date.
    • Legislation has been introduced designed to give companies breathing space before insolvency to consider options in certain circumstances which may be attractive if the issue is more one of temporary cash flow rather than more fundamental issues.

To hear more about how we can help you with your supply chain, please complete the form below or you download our free report.

Matthew Williamson
Matthew Williamson

Partner

+44 (0)151 243 9883 Email Matthew

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Future of supply chain
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