29 Oct 2021

The weakest link

Chain AS 255743047

Supply chain problems are impacting most sectors now, whether through material or labour shortages, transport issues or unplanned price rises. How can businesses and consumers best protect themselves?

We have recently seen it in action, contributing to the failure of a company where I am now acting as liquidator, with devastating consequences - not just for the company and employees but also for their customers, many of whom had paid up-front deposits and will not now receive their product.

If you outsource all or part of your production process or rely on timely delivery of key components from third parties, you are also outsourcing any problems in their supply chain. If there are any increased cost implications, the obvious current ones being building materials and transport, are you able to pass all/some of that on to your end customers under your existing contract terms or will you be able to suffer the margin reduction and cash-flow damage if you can’t. Businesses need to recognize those “pinch points” and plan for them.

Business has become much more complicated and the knock-on effect on customers can be great. If a supplier company goes out of business, consumer customers who paid by credit card (and often debit card) are likely to get their loss covered by the card issuer (within limits, for a credit card >£100 and up to £30,000). Those who pay by direct bank transfer do not seem to have the same protection.

My advice would be (obviously) to always pay by credit card when you can; even if you just pay £100 in that way, the whole contract value is covered.

Be careful out there and watch out for the weakest link!

To discuss this further, please contact Steve Elliott.