Womble Carlyle Supply Chain Management Blog

Following legal issues related to supply chain management.

Tuesday, September 30, 2008

New product packaging limits proposed in China

The China Daily newspaper recently reported that the government has proposed a new rule to limit the amount of packaging used in goods produced or sold in the country.

The rule would likewise ban goods which occupy less than forty-five percent of the space of a product container. The proposed limit was recently announced jointly by the General Administration of Quality Supervision, Inspection and Quarantine and the National Development and Reform Commission (the “NCRC”). The NCRC is the management agency under the Chinese government's State Council which formulates economic policy through rulemaking proposals. If adopted as passed, the rule would also impose record-keeping requirements on all product packagers. The rule still awaits approval by the State Council.

While the move is consistent with efforts of the central government to promote more environmentally sound policies, it can also been seen as the continuation of a general trend of increased regulation by the central government on manufacturing businesses (with a corresponding rising cost of legal compliance for operations in China). As China Daily also reported, opposition from manufacturers already has surfaced to the “one size fits all” rule. Critics fear the proposal may impact some manufacturers disproportionately, like pharmaceutical producers whose products necessarily require more fill materials relative to total quantity or volume of product packaging. Input on the proposed rule is still possible.

For more information, contact a member of Womble Carlyle’s Supply Chain Management or China practice teams.

-- Randy Hanson

Friday, September 26, 2008

Good article on UCC and U.S. contracts

Supply chain managers and legal practitioners alike are surely mindful that the sale of goods is at the heart of every product or parts supply agreement. Such sales are governed in the U.S. not only by the parties' agreement (and perhaps industry custom and practice), but also by the Uniform Commercial Code (UCC) as adopted by each state.

The UCC has various rules that govern the relationship between buyers and sellers of goods, covering things such as contract formation and product delivery and acceptance requirements. Some of these rules are immutable, while others serve on an as-needed basis to fill any gaps in the parties' agreement. Most typically, I suspect that the UCC plays at best an unseen role in day-to-day supply negotiations. Hopefully, most parties (or their counsel) have a general grasp of the relevant UCC rules and are at least aware of potential pitfalls. Some of those issues are fair game for a future blog entry, but even UCC experts will want to take note of the article cited below.

Assume that one party to a supply arrangement is U.S.-based and the other is foreign. After some initial posturing, the U.S. buyer is feeling pretty good that the foreign seller is amenable to picking a U.S. jurisdiction, such as New York or Delaware, for the choice of law. The U.S. party may conclude (with relief) that the international legal issues are put to rest. Good call? Well, your opinion may change after reading this recent article.

Business Law Today recently featured an interesting - and somewhat surprising - analysis on the United Nations Convention on Contracts for the International Sale of Goods. It's worthwhile reading, particularly regarding how the Convention on Contracts relates to U.S. contracts.

The Convention on Contracts is the uniform international sales law governing a large percentage of worldwide trade. More than 70 nations, including the United States, have ratified the Convention.

-- Heather Mallard

Thursday, September 11, 2008

Welcome to the Womble Carlyle Supply Chain Blog

Welcome to the Womble Carlyle Supply Chain Blog. A long time coming, this blog will capture the thoughts of our firm's Supply Chain Management team. What’s a law firm doing talking about Supply Chain Management, you ask? Is this about how the law firm buys paper, toner cartridges, and file folders?

Nope. This is about how we are adapting the practice of law to focus on, assist with, and understand how the law and outside counsel can improve our clients' supply chains, customer/vendor relationships, and be a better teammate in the quest for improved, strengthened, more reliable, and more robust supply chains. The Supply Chain is the culmination of people, contracts, processes, information, transportation and events that get the right things to the right places at the right times, generally for profit. Key areas of Supply Chain Management include contract and commitment management; global logistics, such as distribution, warehousing and joint ventures; import/export issues, including security and legal compliance; and physical and data security, as well as risk management.

The lawyer’s role should be to facilitate and improve the supply chain. This is not "new law," but a new way of considering and integrating legal issues within an overall strategy.

Our clients make up some of the biggest names in manufacturing, distribution, research, transportation, logistics, sales and service. Supply Chain Management is a critical component of their profitability, as it is for virtually any company. It is imperative, then, that all components of the business – finance, operations, procurement, legal – understand the Supply Chain and how their specific roles enhance the chain.

With assistance from renowned experts in the field like N.C. State University's Dr. Robert Handfield, we developed an approach that seeks to integrate our legal expertise to focus on Supply Chain Management problems – rather than approaching these issues in traditional legal "silos."

Our internal research yielded some obvious and not-so-obvious results:

Supply Chain and Supply Chain Management are different at each company - One size does not fit all. Variables include the nature of products, types of customers, number and location of vendors and manufacturing processes.

There are some legal risks in lean supply chains, including:
A lack of supply agreements with key vendors; differing contractual terms among vendors
information management shortcomings, particularly in the areas of forecasting and electronic data interchange; and inadequate disaster recovery planning

Does Supply Chain reliability really matter? Well, according to Georgia Tech researcher Dr. Vinod Singhal, companies experiencing supply chain disruption experienced:
7% loss in shareholder value every day of disruption
33 to 40% lower stock returns over a 3-year period pre- and post-disruption
13.5% increase in stock price volatility
43% median drop in operating income
32% median drop in return on sales
35% median drop in return on assets
11% growth in costs
Businesses have recognized the value of supply chain efficiency for some time. But the traditional structure of law firms doesn’t necessarily mesh with this new way of doing business. As lawyers, we must view our work as a piece of the whole, not as an isolated function. Furthermore, we must gauge how our work will impact our client’s overall operation. Above all, building relationships is vital in today’s global economy; it is more important than contracts. Lawyers must realize this reality and become facilitators in business relationships.

We invite to you to check back with us—we anticipate to update this blog at least monthly, and usually more frequently. We also invite you to take a look at our Supply Chain Management team site.

-- Greg Chabon