Welcome And Luke’s Travel Update

Hello, and welcome to Let's Talk Procurement, the only show you need to master the art of procurement. Let's go! And uh welcome back to another episode of Let's Talk Procurement, the only show, the only podcast that you need to get yourself up to speed, up to scratch with uh with procurement and everything that kind of touches upon it. So um bit of an interesting one today. My my uh my soulmate, my my better half, Luke 10, is still off on his travels. So uh this is a bit of a hand solo. Hopefully it goes well. If it's gone slightly pear-shaped, then you probably will never hear this, so um who knows. Luke 10 did want to share a little update of his uh travels. So he has spent a couple of weeks in Guatemala and he's been enjoying it there. It's actually beautiful. I think he saw a volcano kind of erupting and stuff like that, which is which was quite nice. And um then he moved on to Belize, where he's found himself in some football stadiums cheering on some random teams, and uh met some nice people out there, so he is literally having the time with his life, whilst uh the world of procurement and supply chain gets more and more confusing and complicated seemingly every day. So, you know, we're we're we're out there juggling all of these professional challenges and uh logistical issues, and he's there deciding what cocktail to have on the uh on the White Shore beach, so very, very jealous. I have some listener messages, so there is one message from Gallos which also refers to himself as G1, which we absolutely love. Now, I'm not gonna read out his message or respond just yet because I am waiting for Luke 10 to give you some audio straight from Belize or wherever he ends up by the time he actually gets some signal. So um I will have a detailed response for you, my friend, but thank you for getting in touch, it is much appreciated. Um, but for Kareem, uh who's a channel regular, shall we say, he's a message saying, Hi to Luke's, having completed level four SIPs, should I proceed with the exam path or the assignment route slash SIP supplied program and how to sell this to an employer for funding? Best regards, Kareem. Interesting question. Um I think, and I think we've done an episode on this to be honest, way back when, but there's a couple of factors, and you touched on one of them, and that's the funding element. So if your company are funding you, it's probably easier to get them to do the exam route because obviously they pay per exam, if you like, so for each exam they'll fund it, and then obviously the longer you're there, the more progress you get through your SIPs. However, with the assignment route, it is typically you pay up front, and that's a commitment. So a lot of a lot of companies are kind of saying, Well, why would I sponsor that? Like, we might put some terms and conditions forward to say you need to stay with two years from the date we we issue the funding, they can't really do anything more than that, otherwise you pay back um a portion of the fees, and that's fine. But obviously, if it takes a year and a half to to do the assignment, then you can pretty much leave straight away afterwards. So um, I do know that one workplace I'm familiar with has kind of actually tweaked their um training terms and conditions or funding terms and conditions to kind of say if if you're doing the assignment route, it's it's actually spread out over the duration of the course. So um whilst they will pay for it up front, they then kind of apportion it against your personal record. It so it effectively, if you leave halfway through, you still have an amount to pay. Um, it just gives them that kind of reassurance that you're you're in it for the the long long haul. One thing that that Luke 10 definitely alluded to, which I found was quite interesting, is that when you're doing the assignment route, you need to have you need to have an employer, and the employer when you get to the final stage of it is going to need to sign off you doing a particular work package, um, which your your assignment will then align to, so you have to try and effectively solve a procurement problem within your organization. So uh Luke Luke was alluding to the fact that it's actually really difficult if you do happen to move company because you then might have to go and get new buy-in, or you can't then finish your assignment, and it would create some challenges. Um and also you'll you're then probably locking yourself into the company whilst you do the assignment. So that's kind of one of the things, and then the other thing really cooling will be what is it that you're actually more comfortable with. So, you know, sort of like 80% of each level being um multiple choice and then a couple of essays, or do you just love essays so much that you're willing to kind of do five or six essays with with kind of deep research and and completing them? I think both of them will get you to the same outcome, and obviously you'll be you'll be six-qualified and you'll have sort of a multitude of knowledge from from my perspective. The the exam route gave you exposure to topics that you might not be doing now in your current job or your current role, but could be useful in the future. So uh one for me was warehousing and logistics, it's just something I just wasn't doing at the time. Um, but actually now I'm looking at uh looking at logistics and goods, the movement of goods in in my current organisation, it's been really helpful. I can kind of dig out those textbooks, so that's something I wouldn't have had if I'd done the assignment route. Um so swings and roundabouts. I know that's not really the best answer, but I think in your head you'll know if which one of the two you prefer, and then if it is the um assignment route, you probably have to sell the funding to the employer a little bit harder. Um there is there are some things on the SIP website where they show the differences between levels four, five, and six in terms of skill set and kind of competency, so you can you can obviously use that as well to kind of point to to the employer and say, look, during each of these stages I go from being a tactical procurement professional all the way to uh what we call strategic professional, where you can look at the kind of forward-facing elements of procurement within your business as well, so you can help help them tackle the challenges and hopefully bring new ideas to their company. Um and it'll set you apart as well. So I think if your company is willing willing to foster you and help help you grow as an individual, and you show the desire in your workplace to to kind of thrive and and help them succeed, then hopefully they won't have an issue with the funding, especially because it's core to the profession. So um, but yeah, let us know which which of the two routes you do proceed with. Um, if you have any specific questions about either of the routes, always get in touch. Um I know you know the uh the ways to get in touch with us, but for all you new listeners or anyone else that wants to reach out, our email address is twolukes1sip at gmail.com. That's twolukes1sip at gmail.com. Although, spoiler that's technically not correct anymore because Luke 10 did uh did make it to the end of his assignment route. And then you can also use the link below to get in touch with us and send us a text message. We absolutely love the text messages because they can go straight on to our website and they will be there forever. So you can have a look and you can see the kind of feedback that we get from you listeners, and and it'll be there whether it's good or bad. Um, especially if it's bad, we'll probably pin it if it's up, to be honest. So, um yeah, check that out. Drop us a message and um let us know what questions you have. Something I wanted to touch upon today is I think becoming increasingly prevalent in the global markets, and it's a supply chain, well it's a contractual concept of force majeure. So the reason I want to bring it up is that there's obviously a lot going on globally. There's there's things like chip shortages, and um the emergence of AI is is causing a lot of um supply chain struggles with things like memory, um, SSDs, chips, chips, etc. So that's one component, and then we've obviously got the unfortunate circumstances over in the Middle East, which is causing um a whole host of knock-on effects into the supply chain, into even our everyday lives, right? In the UK, the price of petrol's gone up ridiculously, and it doesn't look like it's going down. I think the the energy companies are just trying to make a fortune off of us. So, yeah, they're capitalising on that. And I think force majeure is a contractual clause, and it's something that sits in pretty much the boilerplate aspects of 99% of contracts, and it's something that we all need to be aware of because despite the fact that it's a fairly routine clause, there are differences in drafting and things that can make it a good clause or a or a vague and not so helpful blob of wording, if you like. So that's what we're going to dive into today, and hopefully it will resonate or it will teach you something new. Um overall, we'll say force majeure is a contract concept as alluded to. It can excuse or delay the performance when an unexpected event beyond the party's reasonable control makes it makes it impossible, impractical, or illegal to continue performing the roles within the contract. So, yeah, it's always as good, it's only as good as the drafting as to whether it can actually be used, and that's why it's really important to check the drafting before you either sign up to a contract with the terms or without the terms in it. You obviously make sure your own drafting's tight as well. So effectively, the clause is all about things that are out of your control as a supplier or even as a buyer, and it typically allocates risk when there's supply chain disruption is caused by events that either party can't reasonably control. Common things that trigger this might be things like war, natural disasters, government action and strikes, transport shutdowns. Um obviously that can be on a global scale, and that might affect the whole logistics and travel route. Um, severe utility failures is another one, and more recently we're starting to see pandemics being shoved into the clause as well. So prior to COVID-19, pandemics wasn't really mentioned in there, and then you saw obviously all the issues where uh there just wasn't enough supply of certain items, even things like toilet roll was crazy at the time, and um pandemics has now found its way in as a force majeure reason. Um yeah, things like cost increases or um things that affect you as an employer only that are on a small scale, like I don't know, your internal pipes had a minor leak, that stuff will will not make it. Um would it trigger? So obviously those events would cause the trigger, um, but not necessarily. So not every company is affected by a political situation, some government actions or a natural disaster. So typically the supplier will start referencing it when they can't manufacture or they can't ship or they can't source their materials, um, and that's where you then start to see suppliers digging out the contracts and starting to reference Forts Mature. So what we're seeing is the Strait of Um Hamas, probably butchered that, but that's obviously a big trade route for oil. Um, and suppliers are now saying, well, we can't use that trade route, so that's delaying everything, we have to find alternative routes, it's taking longer. Uh in fact, we can't even fulfil our duty, so we might be looking at force majeure within the contract. So that's all great, but how do I how do we as buyers kind of handle that and how do we what do we do? So one of the first kind of important things I would say is that we have to make sure that there's three core things that are triggering or resulting in force majeure that we can tick off and say, okay, yes, this is a verified force majeure event. So first of all, you have to make sure that the triggering event actually falls within the clause. So it has to be within in that clause drafting. So if it doesn't specify natural disasters and you've been impacted by a flood, then it makes your argument very, very hard because it's not explicit. Um you have to prove, and so the supplier or the buyer has to prove that the event has actually prevented or seriously hindered their performance. And then also that the affected party has taken reasonable steps to reduce the impact. So it's not good enough to say, oh yeah, it's happened and we're we can't do anything. Have you actually attempted to do it? Have you got a disaster recovery plan? Have you enacted on it? Um you know, it might be that one one of your plants is impacted, but can you just increase your productivity elsewhere in in your estate? So that's the kind of generic three that you need to make sure you're on top of. So trigger an event, is that is that in the draft? Make sure the event has actually prevented or seriously hindered the performance of the supplier, and then the affected party has taken reasonable steps to reduce impact. Um, you also then get, I guess, supporting wording around providing timely notice, providing the evidence and um the explicit duty to resume once the event has ended or um been dealt with. So, what does that actually mean in terms of what happens next once once a force major event has been triggered? So we'll look at um some of the consequences, if you like. So you might get suspension of delivery, you might get a suspension of your payment deadlines, so obviously you can't pay for what you haven't received. You might receive a relief from your liability for the delay or non-performance of your contract. There might be allocation of uh scarce supply amongst customers, so we're seeing that a lot with chip shortage at the moment, so it's when a small batch of chips are then manufactured, how are they being allocated? What is the priority list? Is it things like hospitals and government bodies, or is it people with the most money, or is it you know, I don't know, whatever else you can think of that actually gets priority when those chips are ready to be manufactured and issued out. So that is another consequence, and then also termination rights as well. So if the event lasts too long and it doesn't impact all of your competitors, and it's just maybe yourself and one other, then there may be the look at a termination event, you may wish to exit the contract and work with another supplier. So in a supply chain contract, so with our with our supplier base, um a typical clause will we'll include the following. Um not necessarily limited to it, but just worth being aware of the exact trigger events, so you don't just say anything beyond reasonable control, you explicitly list natural disasters, which you might then you might even define natural disasters and say kind of include all the things that you think you're likely to be affected by. Umtice timing and method, so you as a s you as the supplier will need to notify us within 30 days, and that needs to be done via email to this exact address. What steps are counted as mitigation? So, how how do you mitigate what steps do we reasonably expect you to do? Probably your disaster recovery and business continuity stuff. Uh, whether partial performance of the contract still applies, so are there other bits that the supplier does that they can still deliver upon? Do the payment obligations of us to you as the supplier still continue? And how long should the disruption last before we then have the ability to terminate the contract? So typically in court, vague clauses often fail because they just become disputed over what what event is actually covered, whether it's worth um, whether it's crystal clear that that event is a force majeure event as agreed between the two parties. So I've actually got some wording here. I'm just gonna read this from the screen because I think it's quite helpful to see what you may um what you may hear in in contractual language. So I'm not saying this is perfect drafting, but it's stuff that's maybe familiar or just worth knowing about. So neither party shall be liable for any failure or delay in performing its obligations under this agreement to the extent caused by an event beyond its reasonable control, including but not limited to natural disasters, fire, flood, war, terrorism, government action, pandemic, strikes, port closures, or transportation failure, provided that the affected party gives prompt written notice and uses reasonable efforts to mitigate the impact. If supplier is unable to manufacture, source, transport or deliver products due to a false majeure event, supplier shall promptly notify buyer in writing, providing reasonable details and use commercially reasonable efforts to mitigate the effect of the event. During the false majeure event, supplier's affected obligations shall be suspended only to the extent directly prevented, and supplier shall allocate available inventory fairly among customers where applicable. You may then have the termination clause, so if a force majeure event continues for more than 30 consecutive days, either party may terminate the affected purchase order by written notice without liability except for amounts accrued before or up until the date of suspension. So obviously you pay for anything that's due and that the supplier delivered upon, but recognise that because they can't deliver, that's it, that's the end of your payment obligations. Some of the pitfalls, so some of the things that um where the clauses can go wrong, so things to be aware of when you're looking at contracts with suppliers, especially if it's not on your company standard terms and conditions. Um you need to make sure that the actual disruptions mentioned are involved. The clause needs to include the notice requirements. May also fall short. The clause may also fall short if it tries to effectively cover non-performance, so not an actual disaster, but it's just trying to trying to basically blame non-performance from things like cost increases and they're saying well they can't they can now can't do it for a for a profit, but that's that's not a sustainable trigger of force majeure. Um also commonly a common drawback is if if payment is not, it's not stated whether payment needs to be made or not. Obviously, as buyers, we want to make sure that we don't still have payment obligations in the event the supplier doesn't deliver. So that's very, very key to make sure that is in the drafting. And a very, very simple but worth knowing thing is that the drafting has to flow with the rest of the contract. So where we're saying um it doesn't state whether payment is is due or not, you will obviously have your um your payment clauses and all the triggers and and kind of the process for that. So um if you're if you're doing it on milestones and the milestones haven't been delivered, then effectively that might be your trigger, and you want the wording that you have in all of those clauses to match the wording that you are using and the language that you are using in your force major clause. Which is a lot of the time that is done, that's the way the drafting is is made. But when you then start to get into kind of tweaking the clauses and looking at different ways of drafting with with a with a supplier, then that's where uh the intent and the language can drift. So I think, yeah, so from a procurement perspective, I think it's it's one of those where it's like a kind of template clause, but we need to be on it as we do with all the clauses pretty much, but understanding what it is that the supplier is trying to protect themselves from and what we believe the likelihood is that such an event will happen. I mean typically they're supposed to be low-likelihood events. Um it's important to know if we've got, in the event of force majeure, what we have as backup plans with our customers and what we can do to potentially source alternatives, or do we hold excess stock, or you know, that's kind of a challenge with just in time procurement, is that you you may struggle in the event of a force majeure trigger. So be aware of it, be be conscious of it, and kind of make sure that um you're thinking about it in the wider context of what it is that you are procuring. Uh, yeah, so that's it really. I just kind of wanted to give you an update on that. I think we will start seeing big name suppliers in the in the chip and IT world probably pointing towards force majeure to say why they can't meet orders that you've kind of already placed with them or why they're having to push their costs up and things like that. So it's a really hot topic. Stay vigilant, and if you've got any questions, absolutely let us know. Um, hopefully, you've managed to stick with me for this one. Appreciate it. It's uh it's missing Lute 10, and he has a very nice voice. So um, yeah, hopefully he'll be back soon. But if not, more solos. So uh wish you all a wonderful day wherever you are in the world, and um see you on the next one. See you later.