In my capacity as a consultant, I've been asked from time to time to serve as an expert witness in legal disputes involving outsourcing arrangements. Many, if not most, of the cases arose from performance disputes. Somewhere along the line, the client became dissatisfied with the service being provided and decided to terminate the arrangement for cause. The logistics service provider (LSP) challenged the decision, arguing that it had fulfilled the terms of the agreement. The hostilities escalated into a bitter struggle that eventually landed them in court.
Not all contract cancellations result in litigation, of course. But as any shipper who's been in this position knows, terminations for cause have enormous potential to disrupt operations. It's not hard to see why. An early cancellation is a rejection of the provider, its management, and its operations, and it's bound to create hard feelings. And a resentful partner is unlikely to be a cooperative partner when you go to work out an exit strategy.
While these situations may never be easy, there are things managers can do to minimize the disruption of an early contract cancellation. What follows are six guidelines for managing the process:
The good news is that most responsible LSPs will cooperate, but inevitably there will be some slippage. As the Boy Scouts say, be prepared.