Insights

In today’s tightly interwoven supply chains, a problem with the timely delivery or performance of components and parts provided by a supplier can have a big impact on a manufacturer, potentially causing production disruptions, reputational harm, costly recalls, and warranty claims. This is leading to more disputes over contract terms, the price and performance of parts and, in some cases, litigation. But a manufacturer need not shoulder the burden of these disputes alone. It can seek, and often achieve, the recovery of funds, all while taking care to manage its often delicate and valuable supplier relationships.

Legal departments are making recovery—the practice of proactively pursuing the payment of funds owed to them—a regular part of their operations. They have typically focused on recouping funds from other companies over issues such as IP, antitrust, financial services, and health insurance. But now some are using recovery techniques to mitigate losses stemming from product recall and warranty issues. In addition to mitigating losses, a formal recovery program can help to establish clear supplier expectations and drive desired behaviors.