Vendor Troubles? Request a Sit-Down

No matter the amount of planning or communication upfront, there’s always going to be a problematic vendor who either ships you damaged goods or consistently ships you the wrong amount. According to operations consultant Wayne Teres, you need to begin by collecting evidence of problem. For example, is the vendor sending you shipments without a purchase order or has it sent defective items? When collecting this data, he says, it is important to document the invoice number, the non-compliance issue and the quantity sent. Next, calculate the extra time in hours you spent correcting the non-conformance issues. Now you are armed with factual information to share with your vendor what effect his shipments is having on your business. Once you know how much extra time you are spending and what it is costing you, you can determine a charge that you would assess the vendor.

Next, schedule a meeting with the vendor to share these issues and discuss what corrective action measures the supplier will take. Remember, information is only valuable when it is shared. At the meeting with the vendor:

  • Share the data you collected, the non-conformance issues of its shipments.
  • Notify them that you will be inspecting all their shipments.
  • Request how they will correct this situation.
  • Inform them that failure to correct these situations in the future will result in chargebacks. Charging the vendor for the time spent to correct the non-conformance issues. Explain the charges that you will deduct from their invoices.
  • Get commitment on how the vendor will correct this situation and in what time period you can expect it to occur.
  • Establish a timetable to review the situation; depending on the frequency of shipments, say every 30 days or 60 days.

In the event that the vendor does not correct the situation, you need to make a business decision if this company is worth retaining. After you add the cost of the extra time to the cost of goods, is the profit worth it. In some cases, good business is to fire the vendor.

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