Case Studies – Supply Chain Management

CASE 1 – Seeking Success in Supply Chain Management

PROBLEM:

A large merchandizing company in the midwestern U.S. is losing business due to its outmoded and inadequate system for supply chain management. Although some of the employees are a long time in service, many of them have one year’s experience thirty times rather than thirty years’ experience. Others have joined the company with experience from other firms and they bring with them those legacy practices and behaviors. In addition, some employees, although quite smart and capable, are simply inexperienced.
Several themes and questions appear to be re-occurring on a consistent basis:

  • What constitutes a good contract?
  • What constitutes a good contract management plan?
  • How to write a good scope of work or scope of supply?
  • How can we be more effective in our risk management techniques?
  • Where can we review and consider model contract terms and conditions?
  • Where can we find information on best practices in SCM?

SOLUTION:

The Book “Contract and Risk Management for SCM Professionals”
This book is essentially a how-to book on managing contracts for maximum advantage, while minimizing risks. It brings together not only SCM theory and practice, but other disciplines and skill sets including negotiating skills, legal principles, project management, scope definition, claims resolution and other best practices. The company also invests in the book “Building Your Playbook for Managing Supply Chain Transactions”, which includes desktop tools, references and sample forms. This book identifies steps that an organization can follow as a model for its current SCM practices. Finally they purchase copies of “Model Contract Terms and Conditions with Annotations and Case Studies” to provide their employees with sample contract language explained in terms of effect, with illustrative cases.

CASE 2 – Poorly Articulated Deliverables

PROBLEM:

John the buyer needs to acquire a new system to improve billing for his company. He solicited proposals from several top firms but never took the time to put together a scope of work. John is nervous about accepting a vendor’s proposal but is not sure what to do about it.

SOLUTION:

Scope of Work
John is right to be worried. No matter how good a vendor might be, proposals often do not quite match what the purchaser needs. Moreover, proposals often contain assumptions, clarifications or exceptions which need to be addressed. The better practice is for John, with appropriate assistance, to develop a detailed scope of work. This will allow John to put his company’s exact needs in his own words.

CASE 3 – Inadequate Skill Sets

PROBLEM:

The general manager of a mobile device component manufacturing firm has many good people from various backgrounds working for him in supply chain management. His people are intelligent and hard working but have not had much training in negotiating or managing contracts. Each employee seems to be doing his or her “own thing”.

SOLUTION:

Continuous Training
This is a vital part of how employees learn and grow into their positions. Employees are not always aware of the opportunities to improve how they negotiate and manage commercial transactions in an increasingly competitive environment. Training in these areas assists employees in identifying opportunities for consistency and improvement while avoiding costly mistakes.

CASE 4 – ASSERTING WARRANTY CLAIMS

PROBLEM:

Warranty rights are valuable and can be lost if not correctly asserted. Having a defined methodology for how to determine whether there are warranty rights and the extent of those rights is critical to getting the greatest benefit from your commercial transactions.

SOLUTION:

There are traps to avoid when making or dealing with warranties. When crafting or asserting warranties, asking yourself the right questions will keep you on track. Our books teach both experienced and less experienced business professionals how to ask the right questions. When dealing with warranties, or warranty claims, these would include for example:

  1. What is the warranty’s scope?
  2. When does the warranty expire?
  3. Was there a breach of warranty?
  4. Was notice provided as required?
  5. When does the remedy need to take place/be done?
  6. What remedy applies to repaired or re-performed work?
  7. How will the remedy effect cost/schedule or other work?
  8. What is the value of the warranty work to be performed?
  9. Were all important discussions and decisions documented?
  10. Were subject matter experts and management kept apprised?
  11. Does the contract permit “self-help” as a remedy and if so when?

CASE 5 – CLAIMS FOR EXTRAS

PROBLEM:

Although a well-crafted scope of work or scope of supply will reduce claims for additional compensation, claims for “extras” are inevitable. Employees need to know how to evaluate claims and to do so in a disciplined and methodical manner.

SOLUTION:

Good contract and risk management includes having clear protocols for dealing with changes. Moreover, not all changes constitute “extra work” justifying extra charges. Our books provide a well-defined methodology for dealing with such challenges. This would include asking the right questions including:

  1. Was “extra” work performed?
  2. Was “extra” work authorized?
  3. Was notice provided as required?
  4. Are the charges properly documented?
  5. Will the “extra” work affect the schedule?
  6. Was the “extra” work due to error or inefficiency?
  7. Are the “extra” charges consistent with the contract?
  8. Are certain of the charges barred by the contract terms?
  9. Were all important discussions and decisions documented?
  10. Were subject matter experts and management kept apprised?

CASE 6 – DELAY CLAIMS

PROBLEM:

Even if your contracts contain a well-defined delivery schedule for performing the work or supplying the goods, you can expect that there will be delays. In addition, contractors may file delay claims against your organization based on real or alleged interference. How you deal with those claims as an organization can affect the bottom line.

SOLUTION:

Not all claims for delays are compensable. Knowing how to evaluate the validity of delay claims is crucial. Our books teach you how to evaluate such claims and protect your interests. This includes asking the right questions in correct timing. Such questions might include:

  1. Did a delay occur?
  2. What/who caused the delay?
  3. How does the contract allocate risk of delay?
  4. Were the notice requirements complied with?
  5. Has supporting documentation been provided?
  6. Could the delay have been avoided/mitigated?
  7. Are the alleged damages correctly calculated?
  8. Are the alleged damages barred by the contract?
  9. Were subject matter experts and management kept apprised?
  10. Were all important discussions and decisions documented?