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Situation: The wrong material has been delivered to your warehouse. The supplier was made aware of the situation and has agreed to exchange wrong material and delivered the correct material within one (1) month. Top management has accepted this timeframe as acceptable due to the current stock levels and relation with supplier (first time this has happened). However, after the exchange. the Board of Directors of your company decided that this supplier must be blacklisted and banned the Purchasing Department to source material from the blacklisted supplier. Your CEO has requested an opinion from you on this case. What would your opinion be? What would you suggest as the best way forward for your company?
For me this scenario is not logic!!! The warehouse manager/supervisor should have checked the materials before accepting to receive it.
I think that mistakes during delivery can happen to any supplier, and that the decision about putting him to blacklist is too harsh, considering that the mistake occurred for the first time. In the case that the CEO insists on some form of consequences, I would suggest the payment of penalties for late delivery of the material.
First incidence of such kind doen not warrant such strict action,If your company will do so it will end up nowhere with very limited options to procure their material. I feel the supplier should be put under scanner for future supplies.
Supply of wrong material and its acceptance both went unnoticed / unchecked hence both are at fault, your company needs to have proper system of checking/accepting the material.
- No need to black list the supplier.
- ask for the time frame for the delivery
- now compare with other supplier for the time frame/ quality/ price.
for avoiding these type of situation always follow the below terms.
- Quotation specification to be read/ understand carefully before puting the supplier in comparision.
- prepare comparision mentioning last price/ delivery time/ transportation charges/ brand / warranty.
- mention specification in the LPO for checking at the time of receiving the material.
generate an opinion is not important would be much more interesting to take a supply contract which provides for upstream conditions of sale and supply of material for the production as to ensure similar situations in advance. put the supplier in blacklist could also be a double-edged sword
First collect complete details of this mis-hap. Make an unbiased judgement. If the judgement proves it is a genuine error and there is "NO incompetence or ignorance" on the part of supplier, there is NO need to PAINT any colour on the supplier...............as we all know the success of a business comes from many relationships; "Supplier/Contractor/Consultant" is one such group that stays with us whether it is "SUNshine or NOshine". It is a 'mutual value creation' for both & such incidents should be used to strengthen the relationship with the extension of "pardon & kindness". You will notice......a significant value addition from this supplier in future......!! CEO will be happy with this approach. (in case, you discovered 'ignorance'....register a formal communication of 'drop in service' & its impact on your business. Of course, still give a pardon - being1st time)
Compoundly its not recommended to blacklist supplier. This mishap could be happen. Supplier already agreed to exchange wrong materail with correct one. Moreover, you must have selected supplier based on competitve price and after technical clarification. Selection of supplier is major role in material management.
Also you were having sufficient span and comfort level to wait for1 month, otherwise you could have asked with supplier to change the same on urgent basis within a week time.
If supplier borne complete charges then its okay to maintain business relations with supplier. You will have to discuss with your CEO based on complete technical & commercial evaluation you would have done during procurement process of that material and convince him not to black list that supplier at this stage, if its material is technically accepted and commercially competitve. Instead of blacklisting you can ask for compensation from supplier against delay.
Conceptually, I will question why did we order material which could be delayed for a whole month without impacting our opertations plan. This is not a best practice since it increase our costs by locking cash in inventory.
Secondly, I understand from your question that there are not benalties in the contract with the supplier for wrong deliveries. I will revise the contract to include such claouses. I will also make sure that the same is done for other suppliers' contracts.
I personly will not put the supplier on the blacklist for the first mis-performance especially with the internal problems pointed out earlier, but I will make sure that we have other suppliers for the subject material and use them concurrently.
In this situation, it may not be appropriate to blacklist the supplier as this is the first mistake. Also since the supplier agreed to replace the material (assuming that without any additional cost towards freight, etc.), it means he was willing to cooperate with the purchaser. If it was entirely due to supplier's mistake, even then instead of blacklisting, it would be more appropraite to penalize him partially by getting the material from another supplier who can deliver it in lesser time (maybe at a higher cost). The differential in cost can be charged to the supplier who had committed the mistake. This action would act as a detterent to supplier for future while avoiding any business loss to the purchaser's company.
However, if the mistake was from purchaser's end, either fully or partially, then supplier neither deserves to be blacklisted nor penalised. It maybe possible that not enough clarity with regards to specs and requirement was provided to the supplier at the time of placing the order. Or requirement was changed multiple times leading to confusion at the time of despatch. Or proper communication was not done with the supplier eg. no written document but only verbal or over phone order, etc. In such cases, the onus of the mistake lies with the purchaser and not the supplier.
Either way, it would be wrong to blacklist if the supplier has taken corrective action for a first time mistake.
Keep the supplier as actuall mistake done from the receiving part, if highlighted on spot couldn't be that much delayed, anyhow the cooperation of supplier is there.
