EU vs UK approach to Vaccine Supply
You are all no doubt aware of the current row between the EU and AstraZeneca. AstraZeneca have not delivered on the number of doses they promised in the original deal with the EU. Meanwhile the supply to the UK appears to not suffer from the same constraints. And in the US, they are stockpiling AstraZeneca vaccinations while FDA approval is still weeks away. So according to the media this would seem to be a slam dunk case of a big bad multinational not living up to its commitments to a customer.
But there seems to be more going on here than meets the eye. And a lot of it seems to come down to what is in the contracts. For example, both the EU and the UK financially supported the development of vaccines. But the UK insisted on details of volumes and even a UK first clause being put in their contract. The EU simply went for a best effort pledge. That meant when there was a shortage of supply the UK were first in the queue because that was what they put in their contract. That means we have seen vaccines manufactured in the EU sent to the UK but not the other way around.
So now the EU are considering banning exports of vaccinations. Yes, that may help the short-term crisis. But I suspect the long-term damage will be severe. The relationship between the EU and industry in general will be damaged. If the EU can stop one industry from exporting their products, then they can do this for all industries in the future. One tool a company may use when making investment decisions is PESTLE. Political, Economic, Social, Technological Legal and Environmental. Well, the Political and Legal factors will certainly change if the EU decide they can stop exports in a crisis.
The UK did not beat the EU on this because of Brexit. I am firmly against Brexit. I do not think it will deliver anything remotely close to what the Yes campaign promised to the people of the UK. This situation is being held up in certain quarters as proof that Brexit works. Well, there is a long way to go on that journey. Yes, being free of the EU helped the UK in this case but that alone did not give the result. Instead, the main reason the UK beat the EU on vaccine supply was because their advisors and civil servants knew how business worked and more importantly how supply chains worked. They saw a potential for shortages in the future and they protected themselves when they wrote their contracts. The EU could easily have had that same level of knowledge in their team of advisors. And THAT is the lesson they should take from this not vaccine nationalism and protectionism.
And that is the lesson we can all take from this. I have worked with companies who had “key customers” or “key accounts” who had extremely strict contracts of supply with us. “Best effort” was not acceptable. The contracts laid out clearly exactly what was to be supplied and when. And they also specified the penalties that would result in the case of a shortage of supply. There was no confusion in the event of a shortage. We knew exactly who we could not leave short and by extension who we could leave short.
I urge my clients to think like the large customers (even if they are small). Do not just assume everything will be ok. Maybe the supplier is a long-term friend or maybe you like the way they do business and trust them. But when a crisis comes are those relationships strong enough to make sure you are first in the queue? Probably not. So, put it into your contracts and your supplier agreements. Depending on your size you may not get a “UK first” style agreement with a large supplier but you should certainly be able to improve on an EU style “best effort” arrangement.
So what steps can you take to learn from this?
- Understand the Risks
Covid-19 took us all by surprise. But it didn’t have to. Keep up to date with what is happening in the world and what that might mean for the future. The UK government foresaw the shortage of vaccines and the rise of “vaccine nationalism”.
- Agreements & Contracts
Have clear and defined targets and delivery criteria in your supplier contracts and agreements. The UK had a “UK First” clause in their agreements with vaccine suppliers. What is in your contracts?
- Look at the whole picture
The vaccine is only one part of the product being supplied. There are bottles, caps, packaging etc. All components should be factored in to your review.