The evolving legal response to supply chain management concerns.
GREGORY M. CHABON
Womble Carlyle Sandridge & Rice, PLLC
Main points
• Businesses have recognized the value
of supply chain efficiency, but the
of law firms
doesn’t
• traditional
Businesses structure
have recognized
the value
necessarily
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efficiency,
but way
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• Lawyers
theirnew
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piece of the whole, not as an isolated
• function.
Lawyers must
view their work
a
Furthermore,
they asmust
piece of the whole, not as an isolated
gauge how their work will impact their
function. Furthermore, they must
client’s overall operation.
gauge how their work will impact their
• Supply
chain operation.
management counsel
client’s overall
isn’t
new
law
—
it’s a new counsel
approach
• Supply chain management
to
well-established
law.
isn’t new law — it’s a new approach
• Legal
counsel well-versed
in supply
to well-established
law.
• chain
Legal management
counsel well-versed
in
supply
concepts may
help
chain
management
concepts
may
help
businesses with strategic alliances,
businesses with
strategic
alliances,
intellectual
property,
global
logistics
intellectual
property,
global
logistics
and contract management issues.
and contract management issues.
• Above all, building relationships is vital
• Above all, building relationships is vital
in today’s global economy, it is more
in today’s global economy, it is more
important
than contracts.
contracts. Lawyers
Lawyers
important than
must
realize
this
reality
and
become
must realize this reality and become
facilitators
in these
these sorts
sortsofofbusiness
business
facilitators in
partnerships.
partnerships.
Main points
The value of efficient supply chains is
by now well-accepted in the business
world. The mantra that companies now
compete ‘supply chain versus supply
chain’ is all but axiomatic in business and
management literature. But law firms,
by and large, have been slow to reflect
this trend and catch up with their clients
and, more importantly, adjust their legal
services model to better integrate with,
and serve as a value-added partner to, their
clients for whom supply chain management is a key profitability component.
Traditionally, lawyers in large corporate
law firms have been grouped according
to the type of law they practice, not the
type of work performed by the client. For
example, if a client needs legal counsel on
a board of directors issue, they consult
with their firm’s corporate lawyers. If
their transportation department needs
to negotiate a contract with a vendor,
they consult with transportation lawyers.
And if the company has a regulatory
compliance question, they consult with
lawyers specializing in regulatory law.
But for businesses, the cycle of receiving,
producing and distributing goods is a
single, organic process, not a series of
unconnected steps — all the moving pieces
work in harmony. Too often, the lawyers
are viewed as the final ‘gatekeeper’ to be
passed before action can be taken. In fact,
lawyers are largely trained to view items in
discrete elements, and having a document
‘tossed over the transom’ for review at
the 11th hour is all too commonplace.
With our headquarters in the Piedmont
Triad of North Carolina (home to many
logistics companies, a new Federal Express
hub, and outstanding rail, highway, and
port infrastructure), it was a natural fit
for our firm to focus on ways to better
assist our clients in the area of supply
chain management. We created a supply
chain management initiative whose team
members cut across traditional practice
groups based on what our clients told us
were the key elements of their supply chains.
We realized that we couldn’t meet all of
these needs by ourselves, so we partnered
with Dr Rob Hanfield, director of N.C.
State University’s Supply Chain Resource
Consortium, and one of the nation’s
leading experts on supply chain management, as a consultant on these issues.
Changing business
business climate
climate means
means
Changing
changing legal needs
changing legal needs
Changes in the business climate are
reflected in the coordinated, integrated
approach to supply chain management
that businesses have adopted in recent
years. As a business lawyer and former
engineer, I recognized the increased focus
on supply chain management and the
need to integrate legal analysis as one part
of the process. It was also apparent that
if lawyers were to be effective and add
value, they had to understand how any
individual contract, analysis, regulation,
and so on affects, and is affected by, the
company’s overall supply chain. A lawyer
sitting in his or her office and waiting until
the process is largely complete before
offering an opinion is not advancing the
goal of optimal supply chain management.
Supply chains are far more complex
than they were 20 years ago. Much of
The evolving legal response to supply chain management concerns.
this complexity has crept in over time,
so that a particular company may no
longer have a clear understanding of
where the ‘pressure points’ in its supply
chain are, and what risk mitigation
should be implemented to ensure the
supply chain can withstand disruptions.
One example of taking an integrated
approach to supply chain management is
our work with a client whose supply chain
grew substantially in the last decade. This
growth included the addition of multiple
domestic and international locations,
the creation of a logistics subsidiary, and
expansion of product lines involving
additional and more exotic components.
This company has a long and excellent
history of operations, but over the past few
years its understanding and management
of its supply chain has not kept pace. Our
approach, based on our meeting with the
company’s general counsel, was to meet
with the senior management team from
across the company. Our team comprised
a lawyer versed in overall supply chain
integration, contract management and
corporate structure; a lawyer specializing in import/export regulations and
duties/tariffs; and a lawyer specializing
in freight and transportation issues.
After gaining an understanding of the
company’s issues, we presented it with
several initiatives, including supply chain
mapping which aids in the identification
opportunities for risk management
and tax efficiency; a contract management / standardization module; and
an import/export compliance module.
This integrated set of tools, involving legal
and non-legal expertise, is a good example
of how outside counsel is adapting to assist
companies facing increasingly complex
supply chain management issues. The
general counsel’s willingness to work
with outside counsel shows how both can
effectively collaborate to achieve better
results than has been the case with stereotypical relationships, such as sending the
work to outside counsel with little interface.
Added value of legal counsel
Added value of legal counsel
How can a law firm assist a company’s
supply chain management efforts? With few
exceptions, the law involved supply chain
management issues is not new — it is the
law of commercial transactions, shipping,
and duty/tariffs. The ‘new’ component is
understanding the supply chain and how
individual aspects of it affect other parts of
the chain — that means not viewing any
issue in a isolation. Fully serving clients
means taking a fresh, coordinated approach
to these well-established legal practices.
A good supply chain management legal
team should include lawyers with expertise
in commercial contracts and transactions, intellectual property, antitrust,
trade regulation and international law.
Of critical importance is that both the
GREGORY M. CHABON
lawyers and the client take some time to
review the supply chain and understand
important criteria about the company
and its supply chain (for example, is
the key issue speed, redundancy, cost or
some other factor?). The lawyer needs
to be able to see the whole picture.
Working with Dr. Handfield and our
clients, we have identified key areas where
lawyers can have a substantial impact
on supply chain management issues:
• Strategic alliances — Partnering with
another business, whether international
or domestic, carries a certain amount
of risk. Companies must determine the
scope of such partnerships; negotiate
terms such as oversight, payments and
obligations; craft exit strategies; and
manage tax liabilities.
• Intellectual property — More than
ever, guarding intellectual property
across the supply chain is a prime
concern for companies. They must be
able to share sensitive data along the
supply line while still maintaining an
adequate level of protection. A company
needs a proactive plan to protect its
patents, copyrights, trade secrets and
other intellectual property.
• Global logistics — Doing business
in different countries means dealing
with the cultural and legal differences.
Increased security measures in the wake
The evolving legal response to supply chain management concerns.
of 9/11 have put even more pressure
on supply chains. A law firm should
be able to assist a company to navigate
these waters.
• Contract management — Successful
supply chain management is grounded
in strong contractual relationships,
from raw materials purchases to enduser sales.
Other supply chain-related legal services include business continuity, risk
assessment, transportation concerns, outsourcing of legal services, information
systems issues, environmental challenges
and industry-specific regulation, such
as the guidelines governing the pharmaceutical and banking industries.
Value ofof relationships
relationships
Value
Perhaps the most important role a law firm
can play in the supply chain management
process is in helping companies to build
relationships with their business partners.
There’s a saying in contract law that,
‘The process of negotiating a contract
is more important than the contract
itself’. A well - negotiated contract
has limited value if the negotiation
process has alienated the parties, or
has placed all the risk on one party.
Relationship-building is particularly
important in today’s increasingly global
GREGORY M. CHABON
market-place. Contracts can be difficult to
enforce in some jurisdictions, meaning a
company’s best defense against unforeseen
problems is a solid relationship with
its business partners. But building
those relationships internationally often
requires extra work, given the cultural
differences and language barriers involved.
Gregory M. Chabon,
Co-Chair, Supply
Chain Management
Team, Member,
Womble Carlyle
Sandridge & Rice,
PLLC, GChabon@
wcsr.com.
Lawyers are often viewed by business
leaders as ‘speed bumps’ on the road to
progress. We must change that perception
by adjusting our approach to become valueadded counsel. That means working with
our clients from the outset as true partners,
not as occasional consultants. Our goal is to
be our client’s ‘trusted advisor’ — one who
understands the client’s goals, challenges,
and processes and can add value up
front, rather than being a ‘gatekeeper.’
Greg practices in the firm’s Greensboro,
N.C. office. He is a frequent speaker
on issues pertaining to supply chain
management and the law.
Meeting the legal needs in supply chain
management is an evolving process.
The first, most important, step is simply
understanding that every step in a
company’s the supply chain directly
impacts the entire process. So our
approach must respect that reality and
our goals should be aligned with those of
our clients — to keep the supply chain
moving along efficiently and effectively.
GEORGIA
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