During the COVID-19 pandemic, a number of Bovie’s suppliers have had issues when shipment dates were delayed, then delayed again. After months of accommodations, we thought that we were out of the woods, but then we began to see “Force Majeure” appearing in explanation letters. Could it be that we’ll never get the parts we ordered?
What is Force Majeure?
When we first heard the term “Force Majeure”, we imagined a huge tsunami, hordes of mounted cavalry, earthquakes, a 5,000-year storm, and worse. But “Force Majeure” isn’t the overwhelming threat we college French majors thought it might be. After emerging centuries ago in France, the term found its way into International legal arrangements, and finally into your typical formal contract agreement. “Force Majeure” is invoked when circumstances outside the control of both parties prevents one or both parties from satisfying the terms of the contract.
Suppose for a moment that one of our loyal customers in Colorado asked us to pad print their logo on custom tool cases to be sold at a show in Louisiana in just two weeks’ time. We agreed to do this if they immediately issued the PO and arranged shipping to our dock in three days. They sent us the PO that day. We accepted the PO on the terms agreed. Then they loaded the truck and sent it on its way. A day and a half later, while crossing a bridge over the Mississippi river, the truck is caught in a tornado which hurls it into the dark waters below. Learning of the truck’s sad fate the next morning, we call each other and declare Force Majeure. Our customer can’t hold us to the delivery we promised, and we can’t invoice them for the printing we never performed because the circumstances were outside of our control.
Why does this matter?
Most people think that formal contracts aren’t a big part of their everyday lives. Most of us just issue purchase orders to our suppliers and accept our customers’ purchase orders. But that’s just it—when we send our order to our supplier and they accept it, we’ve created a contract that Bovie will pay as agreed when our supplier delivers the parts. When we accept that purchase order from a customer, we are also establishing a contract, promising the customer the goods ordered at the agreed upon price, location, and date. We’ve learned that the parties to these contracts may also invoke “Force Majeure”, hoping that we’ll all acknowledge that when something out of our control happens, there was little to nothing that could have been done to satisfy the terms of the contract.
But is this true? Ask yourself this: If a snowstorm in Texas shuts down your supplier for 10 days, and you need the materials delivered this week so that you can ship to your customer next week, who in the supply chain could claim “Force Majeure”? Surely, everyone knew the storm was coming and could have taken steps to assure the shipments. Shouldn’t you be expected to have planned for supply disruptions, and taken appropriate action to assure that you could fulfill your promises? On the other hand, what company can truly prepare for and anticipate an “act of God”?
How Bovie Handles Force Majeure
So what’s fair to expect in our everyday contracts? Here’s what we do at Bovie that gives us an annual average of 95% on time or better fulfillment:
- Approximately 60% of the purchase orders that we fill are repeat orders for parts with a specific set of substrates, adhesives, inks, and other materials. Our purchased inventory includes minimum quantities set to the combined expected orders for our customers over an 8–12-week period.
- We contact customers to warn them of potential disruptions to supplier fulfillment and provide a list of recommended potential substitutes for the part components whose supply might be endangered.
- For customers with whom we have durable, long-term partnerships, we have reached agreement to keep 2-3 months of their custom finished parts in stock. We call this our Keystone Partnership program - contact us to learn how organizations like yours guarantee on time performance.
While strategies like these prevent most of the disruptions we commonly experience, nothing can protect the supply chain from prolonged, deep disruptions, at the starting point of the chain. At Bovie, we are hearing “Force Majeure” from many of our suppliers, but we are strategically and diligently working to make sure that we never have to utter the term ourselves.
Author: Gary Shirk - President, CEO and Owner