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Supply chain management plays a pivotal role in any organization because a stable supply of resources is necessary for the appropriate functioning of most if not all, organizations (Seuring, 2013). The current paper examines the case of Fine Spirits Imports, a company that ordered a shipment of wine from a supplier, but numerous mistakes were made by virtually all the parties involved, which resulted in major losses. The paper analyzes in detail the legal aspects of the case and then proceeds to highlight certain supply chain management related to this situation.
Legal Analysis of the Case
It should be noted that in the provided case study, numerous problems are present; in fact, almost all parties involved in it made one or several serious mistakes or misconducts. These errors should be examined in turn from a legal point of view.
First of all, Gus Garcia did not read the terms and conditions of the sale, and accepted the contract according to which the buyer (Fine Spirits Imports) “agrees to be liable for any loss which occurs after delivery of the goods to the buyer.” However, technically, the goods were never delivered to the buyer, and the wine was shipped FOB place of destination; therefore, it might be possible to state that the mentioned condition in the contract does not worsen the situation of Gus Garcia in virtually any manner, neither does it improve the condition of MontGras Winery.
The next issue that should be considered pertains to the payment for the wine. It is stated that the payment was due to the seller “on the arrival of the wine in PortMiami.” When the notice of delivery of the wine to the port was sent to Fine Spirits Imports, the latter did not send the money immediately, as they should have done, because Gus Garcia did not read the email for a week. When the money was eventually sent, it was sent to a wrong account (to that of an orange farm in Morocco). This is the fault of Gus Garcia’s assistant, who “put the wrong information on the documents for the transaction.” Nevertheless, according to the law, the assistant cannot be held personally liable for the lost $15,000 (which might be unrecoverable, if the orange farm refuses to return this money) because he operated as a representative of the firm, and it is illegal to make him return the money either via deductions from his salary or otherwise (United States Department of Labor, 2006, para. 5). Thus, it is most likely that Fine Spirits Imports will be responsible for the lost money.
It is paramount to stress that the wine was shipped “FOB place of destination,” which means that the selling company (MontGras Winery) was obliged to deliver the goods at its own risk to their place of destination, as provided by Uniform Commercial Code ([UCC], n.d., p. 17). Generally speaking, the seller is responsible for the goods, but only until the buyer has had a reasonable amount of time to collect the goods (UCC, n.d., p. 22).
Also, it should be observed that the shipment was delivered to PortMiami according to the schedule; however, the shipper, namely, the company of Smooth Sailing Shipping, put the wine to the warehouse “B” instead of the warehouse “E,” which was indicated in the agreement. Therefore, it is the fault of Smooth Sailing Shipping that the wine was misplaced. However, the fault of MontGras Winery is also present, for they took no further action upon receiving the notice of delivery, although they should have done so: according to the terms of the FOB place of destination agreement, the seller is responsible for the goods until they are delivered to the destination – i.e., to Fine Spirits Imports (UCC, n.d., p. 17), or, at least, until the buyer has had a reasonable amount of time to collect the goods from the bailee (UCC, n.d., p. 22). This is because the goods were misplaced immediately after their delivery to the port, that is, the buyer did not have any time to collect the goods at that point.
As for Gus Garcia, he did not read the notice of delivery for a week after receiving it due to his vacation; Fine Spirits Imports, therefore, did not make any attempts to pick up the wine for a week. However, when the attempt to fetch the wine was made, the wine was not found, and no further steps were taken by Fine Spirits Imports for several weeks. Fine Spirits Imports had more than a reasonable amount of time to obtain the wine or at least to initiate a search in the warehouses by contacting MontGras Winery and/or Smooth Sailing Shipping, but they did nothing, and the wine was only discovered by the U.S. Customs much later; therefore, it is apparent that the fault of Fine Spirits Imports is present when it comes to the spoilage of the wine. However, it should not be forgotten that Smooth Sailing Shipping remains guilty for delivering the wine to the wrong warehouse.
Finally, a worker of Sunshine State Movers who was moving the wine after it was found by the U.S. Customs was injured by a crate of wine that faulted its design, which resulted in serious injury; the worker had to undergo surgery and to obtain a vaccination against tetanus. It is apparent that the defect in the crate’s design was the fault of MontGras Winery; however, the employee received his injury while doing his duties, that is while working for Sunshine State Movers. Therefore, according to the law, it is the responsibility of Sunshine State Movers to compensate for the employee’s injuries (The Florida Senate, 2010). Nevertheless, it might be possible for Sunshine State Movers to sue MontGras Winery for the defect in the crate with wine.
MontGras Winery filled a suit against Smooth Sailing Shipping and Gus Garcia, to obtain compensation for the damages which they suffered because they lost their goods and did not receive their payment. Such a suit should be successful, for, as has been previously stressed, it was the fault of Fine Spirits Imports – and, specifically, Gus Garcia’s administrative assistant, who, according to the law, cannot be held liable for this mistake because he did it while representing the company (United States Department of Labor, 2006, para. 5) – that the money was not sent to MontGras Winery, but a farm in Morocco instead.
Smith (2012) notes that in such situations, there exists a duty of the damager (Fine Spirits Imports) to compensate for the damages that have been made (to MontGras Winery, for the latter did not receive their money because of the fault of Fine Spirits Imports). As for Smooth Sailing Shipping, it is also responsible for taking the cargo to a wrong warehouse, which caused it to be misplaced and eventually resulted in its spoilage. However, the suit of MontGras Winery against Smooth Sailing Shipping will probably not be completely successful, for, according to the FOB place of destination shipping conditions, the seller remains responsible for the goods until they are delivered to the required destination (UCC, n.d.); so, MontGras Winery should have checked whether Smooth Sailing Shipping delivered the wine appropriately or not; but they took no further steps upon receiving the notice of delivery.
As for the suit of Gus Garcia against MontGras Winery and Smooth Sailing Shipping for the damages due to the loss of the sales to the retailers, including the lost profits, it has been noted above that the wine became spoiled due to the actions of all the three parties (MontGras Winery, which did not check whether the wine was delivered appropriately or not; Smooth Sailing Shipping, which put the wine in the wrong warehouse, misplacing it; and Fine Spirits Imports, which did not even open the notice of delivery for a week, and then, having not found the wine in the port, waited for several weeks, un until they were notified by the U.S. Customs). In this case, it is possible that MontGras Winery and Smooth Sailing Shipping will have to partially compensate Fine Spirits Imports for their losses; however, the compensation will not be full, because the fault of Fine Spirits Imports is present as well. As for lost profits, according to Clements (2014), it is most reasonable for Fine Spirits Imports to demand compensation for lost sales. However, it seems unlikely that such a suit will be fully satisfied because Fine Spirits Imports itself contributed significantly to the losses because they did not make any sufficient attempt to collect the cargo of wine.
Finally, when it comes to the injured loader working for Sunshine State Movers, who is planning to file a suit to have compensation for his injuries, it should be observed that the worker might gain such compensation from his employer, Sunshine State Movers because he sustained the injury while doing his duties (The Florida Senate, 2010). According to Polinsky and Shavell (2014), if the worker has to pay for any litigation, he should also demand compensation for these litigation costs. At the same time, there might exist a possibility for the Sunshine State Movers company to sue MontGras Winery to pay the worker, for the seller company utilized a crate which faulted its design.
Acquisition and Supply Chain Management Issues
On the whole, it might be possible to state that Fine Spirits Imports has a large number of problems when it comes to the issues of supply chain management. For instance, it is not clear whether this company evaluated the supplier, MontGras Winery, or verified the quality of the wine that they purchased, or checked whether the supplier was reliable. For example, the wine was of rather low quality if it became spoiled in a matter of several weeks. Gus Garcia’s company did not bother to check the delivery of the product which they had ordered, until the owner of the organization returned from his vacation in Australia.
Furthermore, upon his return, a truck was dispatched to the port to collect the shipment of wine, but, having found no wine, it simply left; after that, the firm did not make any attempts to find the wine and did not even contact their supplier, MontGras Winery. Planning and modeling the supplies delivery is stated to be pivotal in supply chain management (Brandenburg, Govindan, Sarkis, & Seuring, 2014; Seuring, 2013); however, it is unclear at which point Fine Spirits Imports was planning to take any further action, or whether that action was even planned because the firm waited until they were contacted by the U.S. Customs several weeks later. Also, the firm did not request any confirmations of payments that were supposed to be made to MontGras Winery but were sent to an orange farm in Morocco instead.
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Therefore, it can be concluded that the company of Fine Spirits Imports displayed a large number of faults and made numerous severe mistakes about the issues of acquisition and supply chain management. Apart from (apparently) not evaluating the supplier and checking their reliability, the company did not take any actions which were required to receive the goods that were shipped to them. This was one of the reasons which caused the spoilage of the wine and the considerable losses that all the parties involved sustained (or might sustain) afterward. Also, Wang, Craighead, and Li (2014) observe that in such situations, apart from the material losses, the trust between the supplier and the buyer is broken, which causes significant damage to mutual trust.
All in all, it should be stressed that virtually all the parties involved made their contribution to the adverse situation which took place. Some of the parties might legally sue others to obtain monetary compensation; however, in most cases, it seems that the compensations will be partial. It should also be noted that supply chain management in Fine Spirits Imports is virtually absent, and it is needed to establish and start implementing the supply chain management methods in that company if the latter is to be successful.
Brandenburg, M., Govindan, K., Sarkis, J., & Seuring, S. (2014). Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), 299-312.
Clements, B. (2014). Proving lost profits and economic damages: Forecast methodology. Value Examiner, 2014, 6-16.
The Florida Senate. (2010). 2010 Florida statutes. Chapter 440: Workers’ compensation. Web.
Polinsky, A. M., & Shavell, S. (2014). Costly litigation and optimal damages. International Review of Law and Economics, 37, 86-89.
Seuring, S. (2013). A review of modeling approaches for sustainable supply chain management. Decision Support Systems, 54(4), 1513-1520.
Smith, S. A. (2012). Duties, liabilities, and damages. Harvard Law Review, 125(7), 1727-1756.
Uniform Commercial Code. (n.d.). Web.
United States Department of Labor. (2006). Wage and hour division (WHD). Web.
Wang, Q., Craighead, C. W., & Li, J. J. (2014). Justice served: Mitigating damaged trust stemming from supply chain disruptions. Journal of Operations Management, 32(6), 374-386.