We kicked off our seventh year writing the Manufacturing Law Blog with Megan’s predictions for EH&S. Matt will weigh in about labor and employment issues next week. So, now it is my turn:
Sales Growth
You might wonder why I would start a compliance/litigation discussion with a business issue, but for most industrial companies these issues are interrelated. We have been working with our clients for years in finding ways to develop an approach to sales that will drive revenue while mitigating legal risk. The most concrete example is encouraging our clients to adopt a contract management system that gives salespeople flexibility while identifying the truly strategic issues that can lead to significant losses. The secret to success for many manufacturers, particularly those companies that are not “build to print,” is having processes in place at the quotation stage. How many times have you heard someone say that we should have never taken on a project or that we priced it incorrectly, resulting in many non-recurring expenses that can never be recovered? With that said, I have seen a lot of manufacturers get control of this process at the outset, and I expect more of the same in 2020.
International Growth
In 2019, we saw a number of international clients invest in their U.S. operations. I expect this to continue in 2020 both due to a relatively healthy economy and other political forces, such as tariffs. We have also received a number of calls from international companies that are looking to open up facilities in the United States. Typically, the first thing that people would want to talk about is tax planning and corporate structures. Over the past few years, however, international companies usually want to talk about where there customers are located first, and then delve into issues about building manufacturing facilities and the various regulatory challenges that arise from that event.
Customer/Supply Chain Disputes
We are seeing more business to business disputes – particularly in the manufacturing sectors that are struggling. As a general principle, most manufacturers try to avoid litigation with their customers for obvious reasons. And the same can be said of suppliers. There are always bad contracts signed and poor terms and conditions drafted, and if things are going well, companies usually work out their disputes. In 2020, I would look at a sector like aerospace as a harbinger of things to come. We all have read about Boeing, but the engine OEMs are also starting to show signs of seeking to renegotiate deals with their suppliers and recover monies owed under long-term agreements. I expect the supply chain to continue to get squeezed in 2020 and beyond, and I don’t think this will be limited to aerospace.
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