My Supplier Said to Me: Uh, We Just Finished That Batch

On the seventh (work) day of Christmas my supplier said to me “We just finished that batch. I’ll have to start a new one to make that change.”

You just want to issue a quick change-order, but you’re too late. Just as they receive the notification, they have just finished the batch of your parts. Well. Now what? They want to start a new batch. Who will pay for the scrap from the first batch? 

Communication with your suppliers is critical for maintaining a fast and efficient supply chain. 

If the supplier was given advance notice via an EDI 860 transaction set that a new specification was on its way, then the whole situation might have been avoided. Normally, the supplier is only responsible for making parts that are compliant with the specifications they receive at the time of the order. This means that the lack of structured supplier communication has resulted in you as the customer covering the cost of a new batch or trying to find a work around that allows you to use the newly out of spec parts. 

If new specifications are received after production begins, then the cost of halting production and retooling is owned by the purchaser of the parts who sends the new specifications. There is no ethical dilemma here. It is the right thing to do. It still costs money, and that comes out of your company’s profitability. 

So, what is at the root of this problem? I’m glad you asked.

Emails are lost and phone calls are missed. People are busy. When schedules do not line up and supplier communication is not standardized, production can continue for days before your change-order is received. 

What’s the bottom line? You need your suppliers to be tightly integrated so that you have both process and visibility in your communications in order to make these incidents much less common. 

How do you manage change-orders with non-EDI suppliers? 

My Supplier Said to Me: RMA? Part 2

On the sixth (work) day of Christmas my supplier said to me ‘Do you really think we need an RMA? You don’t really want to return it, do you?’ 

As I wrote yesterday, each defect, regardless of size or significance, impacts the overall success of the product it fits into. The buyer takes parts from a bunch of different suppliers and assembles them into their final product, which may go on to another buyer, or may enter the distribution chain from this point.

Cosmetic issues may force the supplier to sell at a discount rate. Since your hourly employees are paid the same regardless that’s really not good for your profit margins.

Functional issues may force the supplier to substitute other parts to keep production running or to issue a recall if it has already shipped to a customer. That means rework and lost productivity time, which also are not good for your profit margins. 

All of this is expensive. Who is going to pay for the rework and additional parts? Who eats the cost of the discount or the recall? Each supplier contract probably contains some guiding information, but the best thing is to avoid these costs altogether. 

Each supplier has to understand how their work can impact the bottom line of a producer. It is crucial to onboard your suppliers with your quality initiatives. Before you tell me that’s a much too heavy-handed approach, consider this: there is no rework that is less expensive than doing it right the first time. 

Consistently issuing RMAs when necessary and taking active steps to reduce them by resolving quality issues amongst your suppliers before batches ship will yield long term benefits. Embracing quality programs like Lean, Six Sigma, ISO 9000, and others increase your profitability over time. 

Remember, sometimes an RMA is necessary, but an RMA is always a loss. Start by working through your supplier communication processes, then work your quality initiatives down into your supply chain. You might just be able to reduce the number of RMAs you have to process in the long run.

How do you manage quality down into your supply chain? 

My Supplier Said to Me: RMA? It’s Just a Little Scratch

On the fifth (work) day of Christmas, my supplier said to me ‘Do you really think we need an RMA? It’s just a little scratch, does it really matter that much?’ 

As prices increase so does the demand for quality. Functionality and cosmetics are both priorities when thousands, and potentially millions of dollars are involved in purchasing a batch of parts. 

What about when the cosmetics affect the functionality? Consider this example. What if that small scratch runs across a functional surface where thousandths of an inch matter? The part then fails the quality test and is subsequently banished to the rejected parts closet. 

To answer the question of the supplier, yes, that little scratch does matter. 

It is absolutely critical that your suppliers understand their function in your business and the key metrics that you use to measure supplier performance. A lack of supplier accountability can lead to a lot of lost dollars out of your company’s bottom line and ultimately your bonus.

It could be as simple as a scratch, a screw hole that is out of specification, or an incorrect paint color. It doesn’t matter. A defect is a defect. Not only do you need to prevent those from arising, but when they inevitably do arise, it is crucial to deal with quality problems in a structured and timely manner.  

This once again highlights an area that is lacking within supply chain management technology. These discussions often happen over email or a series of phone calls, but this lacks business process definition and enforcement. X12 has a specification for the RMA 180 document, but this is little more than a notification and doesn’t facilitate the reject business process either. 

As supplier communications become more complex with the advancement of technology, the need for business process in your supplier communications is growing. Well defined business process always results in the removal of human error. In order to reap the maximum value from your supply chain consider the business process that drives your supplier communications and how it can be improved. 

Where are opportunities for improvement in your reject-based supplier communications? 

My Supplier Said to Me: What is a Supplier Corrective Action Request?

On the 4th day of Christmas my supplier said to me ‘what is a Supplier Corrective Action Request?… Oh! Why don’t you let us skip the paperwork and just fix it?’ 

If you aren’t familiar with what exactly is a Supplier Corrective Action Request (SCAR), it is basically a formal way to stage a supplier intervention. It is a formal request from a buyer to a supplier to make a change that is usually related to quality or performance. In short, the purpose of a SCAR is to tell your supplier that you care about them, but what they are doing is not ok, and you want to help them get well. 

Presentation matters. Consider the state of your relationship with the supplier. What is the state of the relationship before you confront them, and what will it be after? How should it be delivered? Should we just drop it in their inbox, or should we deliver it over Teams or even in-person? 

The Supplier Corrective Action Request is often referred to as a SCAR in a tongue in cheek kind of way because it can leave a permanent mark on the business relationship for better or worse. As a buyer you are intervening in a supplier’s business process. Sure, a SCAR is not usually intended to be harsh, but it is often received that way. 

Yesterday’s article alluded to an important concept that we will elaborate more on in another discussion. There are limitations to what kinds of supplier communication can be managed within the world of traditional EDI. With the concept of a SCAR, we are once again seeing an aspect of the B2B eCommerce relationship that EDI doesn’t service. B2B relationships are growing more and more complex as business process evolves and the need for effective communication across the entire spectrum of B2B issues becomes even more important with the passing of time. 

This raises two questions. Not only, how do you manage hard conversations with your supplier, but also, what is the technological infrastructure that you use to support supplier communication when EDI alone just doesn’t cut it? 

My Supplier Said to Me: Blame It On COVID

On the third day of Christmas my supplier said to me “we’re running behind. COVID has caused delays in our own supply chain.” 

It seems like COVID is all we’ve heard about this year. As countries all around the world went into lockdown global supply chains were interrupted. For some reason, toilet paper was the first to suffer. Shortly thereafter we experienced shortages of hand sanitizer, cleaning wipes, and even meat. 

Common household items were not the only ones to suffer. While people were dealing white gold (toilet paper) in an alleyway, supply chain managers everywhere were receiving phone calls from their suppliers telling them that there were sourcing issues and that they should expect delays. 

While the primary concern of keeping employees safe was behind the shortages, we ought to recognize that a whole host of supply chain vulnerabilities were made known as a result of worldwide shutdowns. We dealt with some of these issues in an article on global supply chain which you can find here.

Simply put, political upheaval, pandemics, and natural disasters can be huge supply chain disrupters. These disruptions cause delays and shortages that are nearly impossible to anticipate, yet they are a part of the human experience and sooner or later will cause problems. Not only do they affect inventories and logistics, but also, they can impact supplier communications across multiple levels in your supply chain.

This brings to light an extremely important concept. That is the ability to standardize supplier communications amongst the suppliers of your suppliers. That’s right. The suppliers of your suppliers. By thinking of suppliers collectively as a three-dimensional ecosystem with your organization as the hub, instead of a linear chain, you just opened yourself up to a whole new world of possibilities regarding supplier risk mitigation. 

How do you deal with shortages and delays that are a result of unforeseen circumstances within your supplier network? 

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