Weathering the (Winter) Storm
Extreme winter weather can cause serious problems. For children, winter weather often means snow days and an escape from the confines of the classroom. For manufacturers, heavy snow and ice can mean absent workers, power outages, and supply shipments that do not arrive. In many lean manufacturing industries, there is little or no margin in the supply chain to accommodate such disruptions and extreme weather can mean missed deliveries to customers.
Extreme winter weather is not limited to the northern states. In fact, winter weather can cause even greater disruptions when it hits in states that are unaccustomed to snow and ice on a regular basis. In such cases, local governments often do not have sufficient snow removal equipment necessary to ensure that roads remain clear.
When winter weather shuts down your plant, what do you do? As with most aspects of running a business, it helps to have a plan in place. However, when extreme winter weather impacts production, there are a number of issues that manufacturers should consider:
- Safety first – Some winter weather events are so extreme that they can pose a safety hazard with icy roads, dangerous temperatures, and other safety concerns. In such cases, the safety of all involved should be your first concern.
- Look at the contracts – When extreme weather prevents you from making timely deliveries to customers, your first step should be to determine what your rights and obligations may be under the contract. Is there a specific provision that addresses inability to perform due to extreme weather?
- If possible, declare a force majeure – Most states recognize some form of the legal doctrine commonly known as force majeure. At its basic level, the doctrine can excuse a party from untimely performance of a contract in certain circumstances where the delay is caused by an occurrence beyond the party’s control (sometimes referred to as an “act of God”). In some cases, contracts will identify the specific kinds of occurrences that may qualify as a force majeure event. When not addressed by contract, whether the circumstances in question rise to the level of a force majeure event will depend on numerous factors including the nature and severity of the event, the degree to which it could have been anticipated, and the applicable law governing the contract.
- Notify the customer – Even if you cannot claim a force majeure event, it is important to notify the customer of the situation. Be sure to take note of any specific notice requirements in the applicable contract. As a practical matter, most customers will prefer to know in advance that their shipments will be late and most will appreciate an estimate as to when normal production can resume. In the worst case scenario where inability to perform results in a breach of the contract, providing notice will put the customer under an obligation to mitigate its damages.