Reallocation of risks within supply chains: The practice of enhanced liability clauses

Daniel Ekwall, Fredrik Nilsson

Research output: Chapter in Book/Report/Conference proceedingPaper in conference proceedingpeer-review

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Abstract

Purpose of this paper
The expression Enhanced Liability refers to clauses in a contract which obligation one of the partners to accept extended liability for future claims payments beyond normal standards of transport law, conventions or national standard terms and conditions for
logistics service intermediaries, logistics service providers and carriers. This paper provides explanations and understanding of how logistics business actors are using enhanced liability clauses in supplier contacts to reallocate their own risks.

Design/methodology/approach
The research is based on a system-theoretical approach, which emphasizes a holistic view
instead of the characteristics of the different parts. The research method used in this paper is deductive. The analysis is based on complexity theory with regard to both the deductive framework and several interviews with insurance and security experts in logistics business.

Findings
The usage of enhanced liability clauses in contracts is increasing and the exact content of each enhanced liability clause is determined in the contractual negotiation process. The enhanced liability clauses are a risk redistribution tool within the supply chain which contributes to higher total cost for the entire supply chain.

Research limitations/implications (if applicable)
The explorative research is primarily based on theoretical deduction because the trade secrets prevent analysis on current valid enhanced liability clauses and how these are used for risk allocation.

Practical implications (if applicable)
The research aims to provide a better understanding for why enhanced liability clauses has limited possibilities as both risk and cost reducing method.

What is original/value of paper This paper introduces the enhanced liability clauses in contracts as a risk allocation method and explains its limitations.
Original languageEnglish
Title of host publication[Host publication title missing]
PublisherNOFOMA
Pages317-333
Number of pages27
Publication statusPublished - 2011
Event23rd annual NOFOMA conference, 2011 - Harstad, Norway
Duration: 2011 Jun 92011 Jun 10
Conference number: 23

Conference

Conference23rd annual NOFOMA conference, 2011
Country/TerritoryNorway
CityHarstad
Period2011/06/092011/06/10

Subject classification (UKÄ)

  • Other Mechanical Engineering

Keywords

  • Risk management
  • Supply chain risk
  • Enhanced Liability
  • Freight forwarding
  • Logistics business strategy
  • Packaging logistics

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