One of the most important things for a manufacturer/distributor is ensuring that its products are shipped in a reliable fashion so they arrive on time and in good condition.  Similarly, manufacturers rely heavily on shipping companies to deliver the raw materials that are used in the production process.  If shipping companies fail to deliver on time, there can be catastropic results.

In my experience, many companies do not have “master agreements” or even a written contract with shipping companies.  Rather, the extent of the relationship may be a phone call asking the shipping company to pick up items from one place and bring them to another.  The risk of operating in this manner, however, is when goods are not delivered on time.  Many shipping companies will say in those situations that they can’t guarantee delivery on a certain date or time, but that the timelines provided are “best estimates.”

For that reason, I encourage manufacturers/distributors to develop terms and conditions that can be used with shipping companies that clearly set forth issues such as:  (1) insurance; (2) who is responsible when the items are damaged; (3) what efforts must be made if the deliveries run into issues on the road, etc.

The reason for instituting such measures can be traced back to the pressures shipping companies are being placed under.  For instance, a recent blog post by Adam Robinson of Cerasis explained the “trucking capacity” crunch.  The post noted that “[o]ver 5,000 trucking companies went out of business in 2012 and nearly 400,000 trucks have been taken off the road. In other words, there are about 8,000 fewer trucks available nationwide on any given day.”  As this shortage continues, it is important for manufacturers and distributors to minimize their risk by developing relationships based on contracts instead of a hand shake or telephone call.