**London**: David Window FBCI examines how contractual agreements enhance supply chain resilience in the first article of a three-part series. He highlights the importance of pre-contractual activities, collaborative approaches, and the understanding of various supplier categories to bolster supply chain robustness and preparedness against disruptions.
In a comprehensive examination of supply chain resilience, David Window FBCI has delved into the pivotal role that contractual agreements play in enhancing supply chain robustness. Featured in a three-part series by The Business Continuity Institute, this first article focuses on the fundamental aspects of contracts in supply chains and their interconnectedness with procurement, service level agreements (SLAs), supplier performance, and the management of associated risks.
Establishing a common definition of ‘supply chain’ is crucial, according to Window. He posits that the notion of procurement and supply should extend beyond the procurement professional’s duties to encompass logistics and warehousing, aligning with broader understandings of supply chain processes. While traditional discussions often emphasise the physical movement of goods, Window highlights the significance of the procurement process as the starting point of the supply chain, underscoring its importance in the overall framework.
The article points out that the pre-contractual activities—ranging from obtaining quotations to adhering to the requirements of public sector procurement such as transparency—are vital in ensuring a resilient supply chain. Industry standards, like the BCI Good Practice Guidelines (GPG) Edition 7 and ISO/TS 22318:2021, validate this focus on resilience, suggesting that contractual risks should be approached proactively rather than merely addressing the geographical challenges of suppliers.
Window explores the concept of category management, a procurement strategy that analyses spending patterns to better understand market dynamics. The BCI Supply Chain Report 2024 indicates that incidents frequently occur within various tiers of the supply chain. Category managers play a crucial role in mapping these tiers, identifying vulnerabilities, and recognising single points of failure. Through this lens, Window raises essential questions regarding supplier reliance and the risk profiles of entities at different levels within the supply chain.
A collaborative approach between procurement and business continuity professionals is stressed, with the GPG V7 providing terminology conducive to such cooperation. For instance, the guidelines clarify the definition of “priority suppliers” as those crucial to the operational delivery of resources, whilst cautioning against the potentially ambiguous term “critical suppliers.”
The exploration of “third-party suppliers” uncovers significant legal nuances. Speaking about this distinction, Window notes that the principle of ‘privity of contract’ indicates only the parties directly to a contract can enforce its terms. This brings attention to the implications of labelling suppliers as ‘third parties’, as it can obscure their contractual rights and responsibilities. The Contracts (Rights of Third Parties) Act 1999 in the UK, for instance, grants rights to those previously classified as third parties, reflecting similar legislative trends globally.
Window outlines the complexities of terminology across sectors, with varying definitions of risk from organisations such as the Prudential Regulation Authority and the Australian Prudential Supervisor (APRA). The concepts of ‘fourth’ and ‘fifth parties’ emerge in the finance sector, representing further tiers of supply that may introduce risk.
In his concluding reflections, Window underscores the necessity of an integrated approach where contractual processes are thoroughly understood in relation to supply chain resilience. By focusing on the often-overlooked aspects of contracts at each level of the supply chain, practitioners can significantly enhance their capacity to respond to disruptions and develop a more cohesive model for resilience, advocating for essential collaboration between procurement and continuity professionals.
The insights from this article serve to shed light on the intricate web that constitutes supply chains, emphasising the need for a holistic understanding of both contractual and operational risks in enhancing resilience.
Source: Noah Wire Services
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