How do I get suppliers to deliver on time? 3

Yes, small specialty components do impact productions schedules. Have routine inspections of the fabrication process by a company official or a 3rd party inspector that you hire (cost more $). Delays or schedule impacts need to be known at time of delay and not days afterwards. Have the delivery of the component(s) from your suppliers part of the purchase order and specify that delays of x-days will cost supplier/OEM y $. You will need to negotiate with the suppliers.
Continue search for other mfgs of components. They do exist . . . when the supplier word is not their bond, time to search elsewhere. Hit them where it hurts the most . . .

Wish you good luck!
-pmover

For small orders, like yours, consider smaller suppliers. ... small enough to make you their biggest customer.



Mike Halloran
Pembroke Pines, FL, USA

As suggested above you can add a penalty clause into any contract, but in reality unless the order matters to a company they will probably decline to do the work or just hike the price.

Again as Mike suggests you could try and find someone where you are their biggest customer, but depending on the amount of work you put out and the amount of plant they would need to cover everything is that really an option?

There are larger concerns that will specialise in lots of small orders and are run very efficiently, that might be a better option.

Sadly trying to find suppliers who really value their customers seems to be becoming increasingly difficult, which is a great pity as being local and a quick turn around is the main edge companies have over imports from Asia and Eastern Europe, where it is nearly impossible to compete on price. Collectively we do seem to shoot our selves in the feet.

Keep looking and try to build good working relationships with the best is the best advice I can offer.

One of the aspects of "Supplier Development" is to determine what management processes your suppliers have. YOUR suppliers don't seem to have much that works well in terms of "project management": they can't seem to meet any schedule.

Some options to consider:
(1) teach them how to do project management well
(2) fund their training for them to go learn how to do it.
(3) Update your Supplier Evaluation procedures to make sure your suppliers have some system in place.
(4) Update your spec package so that this skill is required & add penalty clauses for late deliveries
(5) Review all previous contracts and try to determine the promised/delivered efficiency ratio, then pad all future schedules with extra time.
(6) Rate your suppliers on performance. Use that rating in your lobby or website and also work with your purchasing department to use this as an incentive to improve (use the carrot, not the stick). This certainly should be coordinated with (1) or (2) above.
(7) Find other suppliers, even if you have to add a shipping charge.

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering

The other alternative is in-sourcing.

I.e., set up an internal shop for one-offs and expedited work.
Keep them busy during otherwise idle time by taking in outside work and doing it on an as-available basis.

... So delays in _your_ shop will affect _someone_else's_ review. The converse of that may by what's happening to you now.



Mike Halloran
Pembroke Pines, FL, USA

If you know, your suppliers are blowing out your delivery dates by a week or more, push the required delivery date, forward, by a week or more.
Then when the supplier slips on his schedule, you are still on yours. Whatever you do, never let the supplier know you are doing that.
B.E.

The good engineer does not need to memorize every formula; he just needs to know where he can find them when he needs them. Old professor

I'm surprised no-one has suggested the cash on delivery approach.

What incentive is there for companies, especially the smaller ones, to re-arrange schedules and upset other clients, only to have to wait the normal 30 to 60 days to be paid the normal rate for their trouble.

Money talks!

As a job shop owner/operator, I can attest to what CorBlimeyLimey has suggested. You may not have to go as far as paying COD, but paying WITHIN terms goes a very long way to improving customer service.

It's difficult for me to listen to complaints from a customer whose job shipped 3-4 days late, when his company pays 15-45 days past when their invoices are due on a regular basis. If you're sourcing one-offs and low volume parts, you're most likely sourcing them from job shops. Job shops always perform better for their best paying customers. People that pay early usually get even better service, on top of any early pay discounts.

Your accounting department may not think it's a priority to pay suppliers with small invoice amounts on time, but if your company is a slow-payer, it could be a disincentive for your supplier to be on time. My advice would be to look into it, ask your A/P people what the average days to pay the vendors in question is, and what the terms are. If your company is a late payer, and you can get it improved, at the very least you'll have an extra bargaining chip when it's time to negotiate better service.

E.g. "Hey, vendor X, I know my account may not be the biggest, but we pay all of our bills on time. What else do we need to do in order to get our parts shipped on time?"

-TJ Orlowski

Penalty clauses may work occasionally but they are rather tricky.

Let me guess, you put jobs out for bid? So you spread the work around, but it isn't anything more than a marginal activity for any particular supplier. I'd be inclined to develop a relationship with one supplier for each type of job, or inhouse it as Mike suggested.



Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376

Be more realistic about what it takes to do a small, one-off job. Build more contingency into your schedule for the inevitable hiccups.

The suggestion to in-source might also be a good one. If the work really IS easy and the prices really are high, it's a good financial decision as well as a good decision from a schedule perspective to in-source. Unfortunately you may discover that the prices were better than you figured, and your delivery expectations were actually unreasonable...work that is somebody else's problem is always too expensive and dead easy, isn't it?

Bonus and penalty clauses only work if there are numerous competitors for your business who are serious about it. The small shops suggestion was a good one, whether bonus/penalty is part of the scheme or not. I personally have had ZERO luck with bonus/penalty schemes. Unfortunately, small shops also have no capacity to handle extra business, so your best small shop may not be available to you every time you need them.

Outsourcing is the bain of all manufacturers. What Mike Halloran suggested is probably the most common sense approach, in-sourcing! It is also the solution that most admin will fight to the bloody death.

If you get a system figured out that works, please share it with us. If you've got a shop that is consistently late with reasonable or self-proclaimed lead times, you've got a culture problem, and that is near impossible to overcome.

It is better to have enough ideas for some of them to be wrong, than to be always right by having no ideas at all.

You could always use the "Godfather" approach - although not very legal in the US.!!

What CBL & TJOrlowski say may be worth a try in the unlikely event you can get accounting to agree. Over the last few years they've changed our payment terms to be longer than the typical 30 days, and there's been a corresponding drop in 'on time delivery' from what I've seen - at least on the low volume prototype and 'specials' parts.

Have you actually spoken to any of your suppliers about what it would take to improve on time performance?

Off-Topic: I've never understood how companies can justify changing their payment terms to longer than what they currently have as a long term solution to a short-term problem.

Accounting Person A: "Hey, we have a cashflow problem."
Accounting Person B: "How bad is it?"
Accounting Person A: "We are 35 days late on average. Several of our vendors have threatened to revoke our credit if our payments don't improve."
Accounting Person B: "Just change our payment terms to Net75. Then we'll be current (early even)."
Accounting Person A: "Won't our vendors just increase their prices to us by at least the difference or more in order to finance carrying the A/R for a longer period of time? I mean, unless they start paying their vendors and employees in the same amount of extra days, we'd just be shifting our cashflow problem to them."
Accounting Person B: "Listen, you're making this too complicated. We need to fix this problem now; we can't waste time postulating about what the unintended consequences to the fix may or may not be. Don't worry about it and just get it done."

/end rant

-TJ Orlowski

I've got to 4th what TJ, CBL and Kenat have said. I've lost several really good suppliers over the years over the late payment issue. Accounting departments get really pi77y when a young upstart engineer starts questioning the AP process and procedures, though. Until the young uppity engineer becomes an unwitting vendor, by purchasing equipment on his personal credit, and expecting the company reimbursement to be made on a timely basis...then it becomes a pi77ing match with the company president as referee. Been there, done that, took my leave at my earliest convenience.

When it's MY project, I pay the shop on time and include a case of beer. When it's the company's project, I quote what the shop told me and ask what I should do...then it becomes the accounting dept's. problem.

Further to BTB's post, I too worked for a small company and also faced issues getting shops to finish our work on time as promised.

Similar to BTB, one of the things we did to get on the shop foreman's good side was a case of beer one time, and tickets to a local game that were hard to come by, another time. That seemed to bump us up in the order.

....of course, a year or so later, we ended up being late on almost every payment we owed and he seemed to forget about the beer and the game.

It really depends on why they are late.

Are your expectations unrealistic? Only you can solve that.

Do they consider your job lower priority? If so why? Profit margin? Payment terms? Degree of difficulty? Degree of disruption to their higher volume production? What can you do about any of these?

Suppliers culture? You probably can't change this other thn to change suppliers.

Suppliers ability to accurately asses time required and identify normal delays? You or your production engineers may be able to walk them through this as a sort of training exercise.

I find it is much easier to get a supplier to agree to on time bonus, but once the time is not going to be met, the incentive becomes zero.

It is difficult to get suppliers to agree to penalty clauses. Te strongest incentive can be, "you said by X date. It is now Y date. If its not here by Z date, don't bother ever asking for another order". Of course there are consequences and you should not use this unless your prepared for those consequences.

Regards
Pat
See FAQ731-376 for tips on use of eng-tips by professional engineers &
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TJOrlowski, it's worse than you think. Accounting person B moves to another company and then pitches the idea of paying vendors later as a means of solving cash flow problems BEFORE they occur- the whole thing spreads like a cancer. Or the entire A/P operation is outsourced to a third party company who definitely gets no incentive for making payments on time...

Big companies have the money, but getting it out of them even when they've agreed to pay it can be tough.

These cases of beer you folks are buying to ensure on-time delivery: are you buying these personally, or are you expensing them? Way cheaper for the company than any bonus clause, and probably way more effective, but there's no way my boss would pay that expense claim!

I see the problem as an integrity issue. If a supplier is committing to a date and consistently missing it, maybe you should go with the other guy - the one that told you it was going to take 3 weeks instead of 2 in the beginning. He doesn't lie to get the business, and at least he knows his business and is willing to provide you a lead-time and delivery that won't ding you on your performance reviews. And as others have recommended, once you build a relationship with this supplier, they will be more responsive to you when you beg for a 2 week turn because you have a real time constraint. As long as every job isn't a rush, they will be glad to put in the extra effort required. jmho

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