In a globalized economy where most types of finished products include components or raw materials manufactured by third-party suppliers, the effective management of supply chain relationships is critical. Each party in the supply chain is dependent upon other supply chain parties performing their responsibilities. Where one party fails to perform its responsibilities, the consequences can cascade up and down the supply chain, creating legal exposure for other parties. Therefore, it is important for all supply chain parties (manufacturers, material and component suppliers, distributors and sellers) to develop and implement strategies to mitigate and manage supply chain risks.
The best place to start in evaluating and managing supply chain risk is to investigate and know the other supply chain parties through due diligence to ensure the other parties are reputable and capable of performing their obligations as promised. Where are they located? Can you sue them if there is a dispute? Are they located in a country where it is difficult to sue or enforce judgments?