A Supply Chain Nightmare—Got Milk?

Could you find, vet, and secure a new vendor for an entire region in 90 days? That’s what these large-scale milk producers have been tasked with.

Recently over twenty milk producers in the midwest were informed that May 31, 2018, will be the last day of their contract with Dean Foods, giving them just about 90 days to find new vendors and complete the entire contract process. In the area where the contracts were terminated, Walmart has been in the process of building their own milk plants, which is expected to be in full production by the termination date of the contracts. Dean Foods has yet to cite Walmart as the reason for their termination with these suppliers.

Representatives from Dean Foods are working with suppliers to help them find other vendors to sell their milk. But with no guarantee of a higher demand, especially with so many other producers in the area, there is potential for this situation to happen again. How can farmers be fully aware of what might be coming? Contracts.

From the first time Procurement reaches out to the suppliers, there’s opportunities to have protection for both sides—starting right from when they first negotiate a contract. At this point, time immediately becomes a factor. On the Procurement side, businesses want to find suppliers quickly, and suppliers in turn want to sign a contract to ensure their product can be used. Negotiations need to be comprehensive to ensure both sides have appropriate terms and conditions, but also take place fast enough to work for both parties. Suppliers should ensure that the time period between the notice and the end of the contract that they agree on with Procurement will give them enough time to find new vendors who want to purchase their product.

After the negotiations, once any kind of notice is given, it’s important for the suppliers to review their contracts and see what other protections they have outlined in the original deal. There may be other clauses that offer other safety nets for suppliers beyond the time period before termination. Legal will be heavily involved in this step as they review the terms and conditions of the agreement to obtain all the information they need.

The tools that both sides are using factor into this negotiation. Emailing back and forth, spending time tracking down signatures and legal advice, and drafting contracts from scratch won’t optimize operational efficiency and get signatures faster.

What’s the right tool to use, then, that will help make all of these steps much simpler? A contract lifecycle management platform. From the very start, negotiation between suppliers and processors is much simpler and faster. Procurement can propose a contract by using a template, ensuring they use the right renewal clauses, and online redlining and version controls make conversations and edits much simpler as they are in one single place. Procurement teams on the processors side will have a much easier time with digital tools as they search for the right suppliers, and legal teams can quickly scan through long documents to find the most relevant conditions. Suppliers have a consistent, thorough record of all contracts, and communication within the platform when it comes to renewals or terminations is much easier than lengthy email chains. Faster negotiations means faster signatures, which means both parties are satisfied and close deals in a much shorter time. Finally, termination notices can be easily viewed and notifications allow both Procurement and suppliers enough time to make the right renewals for them.

To find out how a contract management platform can help you better manage relationships with suppliers, request a demo below!