The whole issue of how to take action against suppliers who let you down is not an easy one to reconcile. Yes, it is important to take action against any suppliers who fail to deliver. But what action should you take?
For example, if a supplier fails to on a consistent basis and provides little credible evidence of a fault or desire to improve you could consider yourself quite within your rights to source elsewhere.
However, there is a converse to being too harsh and that is being too lenient. For example you may have a supplier that fails to deliver to schedule the first time, but promises not to repeat the offence. Then the supplier fails to deliver for the second time, and a third time each time suggesting that next time will be better. If you just keep on forgiving the supplier and being lenient, then they may well place you at the bottom of their priorities concentrating their efforts on making sure that customers who are more vocal will get deliveries on time, every time.
Suppliers are only human and if they think that a particular customer will not complain or will not be too punitive, if they miss a deadline, then they will be more likely to miss that deadline and meet others. That is not to say that they are being disrespectful, they are simply making judgment calls, according to what they think will bring them the least amount of hassle.
Ultimately however, being either too punitive or too lenient is not a good thing and there are lots of difficulties associated with both. Perhaps the best way to be is to be firm but not too firm, in other words applying an appropriate process that sets the expectation of buyers requirements to the seller whilst establishing grounds for corrective action (or damages) in the event of failure.
For example, Wal-Mart are taking action with regard to suppliers who fail to deliver. ‘Failure to deliver’ can of course be about delivering too early or delivering too late. Usually we all think about failure to deliver on time as being about late deliveries, but if you have a delivery made a week too early, it is often viewed as a fail as it ties up cash and other ‘processing’ resources.
Thus Wal-Mart have come up with a new system whereby suppliers need to have their goods delivered in a 4 day ‘window’ which culminates in a MABD, which is an acronym for Must Arrive By Date. If the goods have a MABD that is on a Thursday, then they can deliver Monday through Thursday of that week. If they consistently fail to meet this deadline, then they will have a penalty charge, which set at a % of the invoice. This acts as a way of ensuring the supplier knows the requirement and sets a contractually agreed rate to apply damages if errors occur.
By ensuring that buyer and seller have a process to follow, KPI’s and contractually agreed terms in case or failed delivery/quality both buyer and seller know where they are – there is no ambiguity (other than who’s fault the failure is) and it isn’t a case of being either too lenient or too draconian depending on the situation all suppliers are treated the same.