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 READ

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 05

Meridian Logistics

Read from this chair →

// THE MD'S CHAIR

The Ninety Days

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// THE CUSTOMER'S CHAIR

Everyone Signs It

You are here

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 NZ$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. Through the MD, and then more directly through a call you did not expect, its bank has asked whether the notice period could become 180 days. The bank was polite about why. It 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 is asking about your clause. Everyone signs it. What do you do with it?

// FY25 SNAPSHOT

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

REVENUE

NZ$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

Mid-tier NZ 3PL operators typically hold top-customer share below 35%. At 58% your supplier's 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]Hold the clause — it is standard, everyone signs it, and flexibility is the whole point of procurement[B]Trade it — 180 days for a rate step-down or a service commitment; a supplier whose bank will not fund its fit-out is your capacity problem in eighteen months[C]Extend the notice period to 180 days unilaterally — goodwill costs nothing and the relationship is five years long[D]Start dual-sourcing the national contract now, so the ninety days is an option you could actually exercise

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. The bank is not being difficult. It is telling you where your clause shows up.

Why not A: holding the clause because everyone signs it 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.

Why not C or D: C gives 180 days away for goodwill, which is a concession nobody records and a precedent every other supplier will cite. D starts dual-sourcing a supplier that is performing, paying a second operator's learning curve to turn a paper option into a real one you still would not want to exercise.

Which is why the senior banker's advice, in the customer's chair, is B. Trade the clause. One hundred and eighty days in exchange for a rate step-down in year three, or a service-level commitment on the dedicated facility, or both. You are selling an option you would never exercise for a term you will actually use, and you are buying a supplier whose bank will fund its fit-out on five-year terms, whose trucks get replaced, and whose capacity does not become your problem in eighteen months. A trade is a term. Goodwill is not.

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. The lender's reading is the one the other two are reacting to.

// 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?

Read from this chair →

// HOW READERS ANSWER

The senior banker's read is [B].

[A] · 42%

[B] · 27%

[C] · 19%

[D] · 12%

The tempting answer is A. The senior banker chose B. 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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