Meridian Logistics Ltd, the customer's chair: What do you do with the clause?

// DRILLS / ISSUE 05 / MERIDIAN · CUSTOMER

ISSUE 05 · 2026-09-05 · 5 MIN READTHE SENIOR READ — MICHAEL

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 05

Meridian Logistics

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// THE MD'S CHAIR

The Ninety Days

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// THE CUSTOMER'S CHAIR

Everyone Signs It

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Everyone Signs It

MERIDIAN, FROM THE CUSTOMER'S CHAIR

LOGISTICS · THE CUSTOMER'S CHAIR · DIFFICULTY 3/5

// THE SETUP

You run procurement for the national grocery chain. Last year you renewed the national distribution contract with Meridian Logistics, five years with volume commitments, 90 basis points cheaper than the contract it replaced, and with the standard 90-day termination for convenience clause that your template carries and Meridian's MD asked you, once, to soften. You declined. Everyone signs it.

Meridian is borrowing US$6.0m to serve the contract: eighteen new linehaul units and a distribution centre fitted out to your network. You are now 58% of its revenue. This week Meridian's MD came back, this time with a reason and something to offer: he asked whether the notice period could become 180 days and what the chain would pay for the fit-out if it left early, and he read you a sentence from his bank's term sheet. His bank is funding a dedicated fit-out against a relationship you can leave in ninety days, and it has structured the loan so that the fit-out is amortised inside three years rather than five. Meridian's fleet averages 6.8 years and the new units are partly replacement. The contract starts next quarter and your service levels require the full capacity from day one.

Your legal team says the clause is standard. Your finance team says a supplier at 58% is a supplier you should be able to leave. Your operations team says re-tendering national distribution would take a year and they would rather not think about it.

Your supplier's bank has priced your clause. Everyone signs it. What do you do with it?

// FY25 SNAPSHOT

SOURCE: PROCUREMENT FILE · MERIDIAN FY25 · COMPOSITE CASE — FICTIONAL

REVENUE

US$52m

▲ +21% (2yr)

TOP CUSTOMER

58%

▲ from 31%

CONTRACT

5 years

90-day break clause

EBITDA MARGIN

8.2%

▼ −90 bps on renewal

FLEET AGE

6.8 years

▲ replacement deferred

Two years ago you were 31% of your supplier's revenue. At 58% its bank is pricing your clause, and the price shows up in what it will fund.

// YOUR JUDGMENT

What do you do with the clause?

[A]Extend the notice period to 180 days unilaterally — goodwill costs nothing and the relationship is five years long[B]Start dual-sourcing the national contract now, so the ninety days is an option you could actually exercise[C]Trade it: 180 days' notice and the unamortised fit-out if you leave early, for a service commitment or a rate step-down[D]Hold the clause — it is standard, everyone signs it, and flexibility is the whole point of procurement

This drill needs JavaScript: the options above cannot be selected without it, and the senior banker's reading stays hidden. Turn JavaScript on and reload the page to take the drill.

// THE READING

Read the clause the way the bank has, as an option, and then ask what it is worth to you. Ninety days is the notice you could give. It is not the notice you could use: re-tendering national distribution, standing up a second operator, migrating the network, is a year of work and a season of risk, and your operations team has just said so. The option you are holding is one you would never exercise in ninety days. But it is still priced, and the price is being paid by the other side: in Meridian's cost of capital, in a fit-out amortised over three years instead of five, in trucks that are old because replacement was deferred to win your contract.

Holding the clause because everyone signs it, D, is holding an option because the template printed one. Flexibility is the point of procurement, and this clause gives you almost none of it in practice while making your supplier expensive to fund. The under-investment that produces is in your own network, in the distribution centre your products move through.

The senior banker's advice, in the customer's chair, is C. Trade the clause: one hundred and eighty days' notice, and the unamortised cost of the dedicated fit-out if you leave before the term runs, in exchange for a service-level commitment on the dedicated facility, or a rate step-down in year three, or both. The fit-out payout costs you nothing unless you leave, which your operations team has just told you would take a year. You are selling an option you would never exercise for a term you will actually use, and buying a supplier whose bank can lend the fit-out over the contract rather than three years, whose trucks get replaced, and whose capacity does not become your problem in eighteen months. A trade is a term. Goodwill is not.

Giving the 180 days away, A, is a concession nobody records and a precedent every other supplier will cite. Dual-sourcing now, B, pays a second operator's learning curve on a supplier that is performing, to turn a paper option into a real one you still would not want to exercise.

A ninety-day clause is an option you will never exercise in ninety days. Sell it for something you will actually use.

// THE SAME FILE, FROM THE OTHER CHAIRS

Three people read this file in the same week, each from their own side of it. Only one of them holds the bank's lever.

// THE LENDING CHAIR · ISSUE 05

Meridian Logistics

One customer is now 58% of revenue — and the expansion request is for assets dedicated to that customer. The contract has a 90-day break clause.

Read from this chair →

// THE MD'S CHAIR

The Ninety Days

The bank funded the trucks for five years and the fit-out for three, and told you it is lending to how hard you are to replace. What do you do with that?

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// HOW READERS ANSWER

The senior banker's read is [C].

Early days. The distribution appears here once enough readers have answered.

The tempting answer is D. The senior banker chose C. The reading explains what the ninety-day clause is really worth to you, what it costs the other side, and why an option you would never exercise is still expensive.

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