When problems in the supply chain affect your own production in mechanical and plant engineering: What legal solutions are possible?
Despite supply bottlenecks, exports from the machinery and plant engineering sector are almost back to pre-crisis levels – order intake remains at an exceptionally high level. How quickly the orders can be processed is difficult to estimate on the basis of the continuing supply bottlenecks. Many companies in the machinery and plant engineering sector are facing major challenges from the continuing problems in the supply chain and the associated cost increases.
ProduktionNRW organized a virtual exchange of experience for the mechanical and plant engineering sector in NRW on February 15, 2022, in order to classify the handling of delivery disruptions from a purchasing-specific and legal perspective. The aim of the event was also to offer participants a platform for exchanging ideas among themselves about possible solutions.
Procurement markets: situation and options for action
Michael Wolf, speaker of the VDMA Business Advisory, addressed the current challenges and design options in purchasing management in his keynote speech and thus provided a basis for discussion at the event. For mechanical and plant engineering, production delays due to material shortages are among the key challenges. These frictions in the supply chain are not uncommon in recovery phases following a sudden slump in demand. At present, however, supply bottlenecks and cost increases are assuming extraordinary proportions. It is currently particularly problematic for electrical engineering/electronic components, metals and plastics. The cause behind the shortage of materials is not just due to the Corona pandemic but has a variety of causes, including substantial capacity bottlenecks in the semiconductor sector, for example.
Short-term solution approaches, such as searching for hidden inventories at the customer and/or supplier, are increasingly rarely crowned with success. Long-term measures relate, among other things, to the common parts strategy, a binding forecast or contract design. A particular challenge for companies is also the volatile price development at the supplier and the constant price commitment to their own customers. In this context, efforts should be made to create more congruence in terms of terms and requirements.
Dealing with supply disruptions from a legal perspective
In his keynote speech, Volker Herrmann, attorney at law at Orth Kluth, addressed the legal aspects of the current supply disruptions. Based on a case study, different legal and contractual regulations were considered and analyzed.
For example, should the supplier refer to “force majeure” in the event of disruptions in the supply chain, the contract must first be examined for the existence of a corresponding force majeure clause, its prerequisites and legal consequences. The reference to “force majeure” is actually foreign to German law – an exception being, for example, travel law. Force majeure clauses can, however, be included in a contract with a supplier, but then require a precise definition of the requirements and consequences.
Although companies in the mechanical and plant engineering sector often have the law on their side vis-à-vis their suppliers, it is recommended that an amicable solution be found with the supplier in the current situation. Long-standing and proven contractual relationships are often involved – which could possibly break in the event of a legal dispute. Nevertheless, an attempt should be made to temporarily limit price increases or delivery postponements, to make them transparent and to review them regularly. In case of doubt, payment should only be made with reservations.
In the concluding round of discussions, the higher-value clause, the anchoring of price escalator clauses and – based on a concrete example from among the participants – the unilateral adjustment of supply conditions were addressed. The event made it clear that mechanical and plant engineering in NRW continues to be confronted with problems in the supply chain and cost increases – a legal review of one’s own contracts can relieve the current situation if necessary.
Organizer
The event was offered by ProduktionNRW. ProduktionNRW is the competence network of mechanical engineering and production technology in North Rhine-Westphalia and is implemented by VDMA NRW. ProduktionNRW sees itself as a platform for networking, informing and marketing companies, institutions and networks among themselves and along the value chain. Significant parts of the services provided by ProduktionNRW are funded by the European Regional Development Fund (ERDF).