Could a supply chain disruption result in a legal action?

| Apr 17, 2020 | Firm News |

Customers most likely will not react well to lost shipments and delivery delays. Some may threaten your company with a legal action when it begins to affect their ability to meet their own customers’ deadlines. Having a back-up plan could help you mitigate the risks of liability during a supply chain breakdown. 

Reducing risks in the supply chain and distribution channels requires a second source of operations, as noted by Harvard Business Review. Having a backup warehouse or source factory could help to continue your operation when your primary location or supplier suffers a temporary closure. 

A large, elaborate second source is generally not necessary. Depending on your company’s production schedule, you may design a second location with enough supplies and employees to fulfill an immediate quota. 

Workforce and employee mitigation 

Colorado companies with a full-time workforce could benefit from planning for a disaster that prevents employees from commuting. Having a smaller or outsourced workforce located near your customers allows your company to service them without traveling from your own base of operations. 

If you service customers outside of Colorado, creating a remote location requires setting up an entity to do business in another state. Each state, however, has its own legal requirements for registering and operating within its jurisdiction. 

Supplier disruption risk reduction 

Relying on suppliers to deliver raw materials means that a large-scale disruption could result in not receiving your required shipments in time. The impact it may have on your production and order fulfillment could result in a significant loss. Shifting suppliers across several different regions may reduce the risk of shipments not arriving on time. This could enable you to meet your customers’ demands when a primary supplier experiences order fulfillment issues.