How to Make suppliers deliver on Time 6

[Srini Raja]

I came across this thread that is already closed

https://www.eng-tips.com/viewthread.cfm?qid=302827

Is this topic still valid. Do companies still have issues in getting on time delivery from their suppliers.

Wondering if this topic is still valid and what solution each company is adopting to get delivery on time?

 

[IRstuff]

The bottom line is that you cannot "make" someone do anything they don't or can't do, short of physical threats. Additionally, there are always incentive to promise the most optimistic schedule for projects, since that's almost always one of the top 3 most important supplier selection criteria.

And, of course, sh*t happens, particularly if and when the project contains developmental tasks that are not standard off-the-shelf products.

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[truckandbus]

standard policy where I work now is to lie about when you need the parts.

Personally, I can't stand the practice, particularly when a supplier does meet the delivery requirement and we sit on the parts and they call daily asking how the testing is going

 

[CWB1]

Handling difficult suppliers isn't my job, that's up to the purchasing staff. As an engineer, my purchasing prototype/FA/other parts is only one tiny aspect of a long, complex relationship. Many suppliers that are a PITA for prototyping are great at being on time with good parts and steady pricing. The opposite is true as well. Consequently, I provide my feedback to the purchasing folks and leverage them to pressure suppliers when necessary to receive my parts on time, but ultimately a "difficult" supplier to me might be a great supplier to the plant.

 

[SandCounter]

Put a liquidated damages clause in your specifications or request for proposal, then when invoiced for the late parts, pay the only the reduced amount based on your RFQ. Just be careful, if the LD's are too high, they will start factoring it into the price.

 

[rotw]

Activate suppliers early on, I mean even before RFQ. It may appear useless as the formal inquiry gives the real start. Yet, I found it useful to activate suppliers (informally or not) via email, phone call or whatsoever. This way it doesn't come out of the blue and they may already plan resources upfront. The sooner you get a quote, the better. Not that it makes huge impact, but it helps.

 

[JStephen]

"Put a liquidated damages clause in your specifications or request for proposal, then when invoiced for the late parts, pay the only the reduced amount based on your RFQ. Just be careful, if the LD's are too high, they will start factoring it into the price."

Very common in the construction industry, especially public works contracts.
Four issues come to mind:
One, you may find suppliers/contractors that simply won't agree to that, if they don't normally deal with such requirements.
Two, as I understand the laws, a liquidated damages clause has to bear some resemblance to actual damages incurred, and can't just be a penalty clause. Speaking of which, if you do incur costs from delay, it's just as reasonable to include a bonus for early delivery as well.
Three, whether high or low, the LD should be factored into the price, unless the supplier is pretty sure there is zero chance of delay.
Fourth, in some cases, it simply may not be reasonable to saddle the supplier with the LD amounts that are appropriate. If you have the million dollar contract, and you want the hardware store to guarantee they'll have your bolt tomorrow or pay you $10,000 a day until they do, you're not likely to find a hardware store to agree to that. In that case, the purchaser has to assume that risk rather than the supplier.

 

[Srini Raja]

Hi,

Thanks everyone for the valuable inputs

Thanks

Srini

 

[zeusfaber]

Understand how important the supplier is to your business - and how important your business is to the supplier. The search for a universal magic bullet is doomed to failure, but once you understand the unique nature of your particular supplier/customer relationship, you won't be looking for a universal solution.

A.

 

[ProEpro]

It took me too long to learn that if the supplier fails you look like a failure.

Work with them in the beginning to understand if they can deliver on time. Make sure they have everything they need. Get involved with the supplier selection.

Work with multiple suppliers where you can so there are options when one under performs.

Incentives for early delivery can help on big projects. Penalties don't work as well unless they are for defective products.

 

[BrianPetersen]

If someone needs something in a week from when they call, and there is a month of order backlog at the time that they call, they get slotted in at the end of the current backlog. It might be late from their perspective, but it's on time from my perspective.

"failure to plan ahead on your part, is not an emergency on my part" ...

 

[fel3]

JStephen…

Somewhere in the California legal codes are (were?) provisions for both "Liquidated Damages" (LD) and for "Forfeiture Due to Delay" (FDD). It's been at least a decade since I researched this in detail, including actually reading the relevant legal code sections. However, during a very brief on-line search of the California legal codes I only found LD (Public Contract Code §7203) and not FDD . Perhaps FDD is no longer, or perhaps I didn't search hard enough. In any event, I don't know what other states allow, so this is just one tidbit that may or may not be useful for this discussion.

Back in the mid 1980s, one of the in-house attorneys at the company I worked for explained to me the difference between LD and FDD this way:
- To claim LD, you must prove [1] that the delay is the responsibility of the contractor and [2] the delay caused real damage to the owner (usually monetary). In California, at least, most agencies and engineers include LD in their construction contract documents.
- To claim FDD, you must prove only that the delay is the responsibility of the contractor. This lower bar is much easier to clear, so we always used FDD in our construction documents unless the owner overruled us.

To the OP: The point to all this is that you should look into including FDD in your supplier contracts, rather than LD.

============
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--Winston S. Churchill

 

[zeusfaber]

If you're going to rely on legal remedies like LD and FDD (and in my mind, that sort of thing ought to be a last resort), then you'll need to check whether they're enforceable in the law which applies in your part of the world.

For example, where I live and work, Liquidated Damages are a genuine possibility (though they fell out of favour with my employer perhaps fifteen years ago). On the other hand, under English Law, you can't enforce a penalty clause.

A.

 

[truckandbus]

If production deliveries are late, you may need to assign a supplier quality engineer to camp out at the supplier to babysit the production and delivery of your parts. Often the SQE will be able to see where the bottlenecks are that may be alleviated by design changes, or they may be able to offer suggestions for process changes based on experience with other supplires

If prototype part deliveries are late, you may need to make sure the supplier understands your actual needs. Does the part really need to be painted or plated for your purposes? Do they only deliver on Thursdays and you can pick up on Monday? I'd be wary of LD clauses, etc. because once you start playing hardball expect the same treatment in return (want to open up a hole? Sorry, need to requote - get to the back of the line. Move a slot? Normally I'd weld the existing one closed but now I'll scrap the WIP at your expense. I finished your parts early but I'll keep them on the shelf for a week and deliver per the PO. I noticed the hole pattern in part A didn't match the hole pattern in part B but I'm delivering what you asked for..)

 

[JStephen]

fel3, what I remember reading long ago is as zeusfabor says, you can't enforce a penalty clause. That's in a contract, you can sure enforce penalties in a legal system, but the basis of the contract was that it involves the exchange of one item for another, and so to exchange one item for nothing didn't fit that model. And presumably that's why nearly every LD clause I've seen will always say it is Liquidated Damages and not a penalty.

 

[TheTick]

You can put all the threats you want in the contract. Nothing replaces a good relationship.

Start by having an actual conversation with the supplier. See what is normal for delivery times. Set realistic schedules. I find it far better to be predictable than late.

If everything is "urgent", then nothing is.

 

[fel3]

JStephen…

I know for certain about one project from back in the day where the client was able to legally enforce FDD in court. It wasn't my project, but it was in my office so I knew quite a lot about it.

I'm not sure your statement "the basis of the contract was that it involves the exchange of one item for another, and so to exchange one item for nothing didn't fit that model" is correct. Just as some construction contracts include a bonus for early completion (exchanging one item for nothing), a penalty for late completion is the other side of the same coin.

I wasn't able to determine if FDD is still in the California legal codes, but it most certainly was at one time. Since it was in the codes, it was certainly enforceable. If it is still in the codes, then it would still be enforceable.

Fred

============
"Is it the only lesson of history that mankind is unteachable?"
--Winston S. Churchill

 

[CWB1]

Contract clauses like those mentioned might work if you're working in a micro-economy with a local supplier but most of us work in the macro, good luck enforcing those across state much less national borders. I reckon our legal counsel would take such a suggestion about as well as the IT dept does my recommendation to put another quarter in the server.

 

[btrueblood]

"How to Make suppliers deliver on Time"

Make sure to pay them on time per the contract terms. Can't begin to count the number of good vendors that have gone away because we (well our accounting dept.) couldn't/wouldn't meet their payment terms. 90 days for a small mom+pop shop can be onerous when they are trying to balance the checkbook at month's end.

We were in a long term production contract with late penalty clauses, and successfully negotiated a reciprocal "bonus" clause for being ahead of the required ship dates. Was a good contract, good relationship between us and them like Tick said. We busted our heinies to get the parts ready to go out the door a month ahead of schedule, and gave nice bonuses to those involved. Happy customer, happy boss, happy workers.

 

[gerhardl]

It has been enlightening and entertaining to read all answers to this thread. Trying to comment and summarize:

1. Keep a good relationship and open communication lines, and check status with your supplier, and pay on date.

2. I cannot see any legislation denying that it is OK to agree on a payment scale that says high pay if supplied on data a, lower pay if paid on b, even lower if paid on c, and contract forfeited if not supplied on d (except 'force majeure'. This is quite common in Europe.

3. If expected delivery date/time failing: ask (politely) for exact delivery date, stress that your QA system requires this (implied but not stated that this will be a black mark on the supplying company's QA system), state exactly (date and time) when you expect/need to have the answer, state that you will follow up (to the level above) a couple of hours after the answering time if you do not gat an answer. Then follow up and repeat if necessary to top level.

4. Some companies buy external transport from other sources. If transport might be critical: demand (in contract) all transport details and access to tracing information immediately when delivered to transporter.

5.From my own experience: in conference where daily fines for late delivery was required in the contract and disputed by the selected supplier, the supplier was asked: 'Is it so that you actually do not intend to supply at the correct time?'. Daily fines for late delivery were promptly accepted.