NPI Supply Chain Craft

Practical Techniques for Handling Late Purchase Order Deliveries.

For Buyers or Purchasing Agents, late part deliveries are an excellent way to become a negative center of attention. These posts will mostly focus on 100% supplier fault situations (not the ones that originated on your company’s end). Unfortunately, the first perception is usually that you failed somewhere along the order tracking process. If the late parts happen to be critical to schedule (i.e. operations are stopped), you get to enjoy a higher level of pressure and visibility. Now you may be approached by various internal customers, stakeholders, Managers, and Directors (including your own) for regular status updates. At this point, whether or not you could have done a better job is irrelevant. The problem will only go away once the supplier finally delivers those parts. And they better pass quality inspection!

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Quick Links

• Part 1: Detailed Status & Causes
• Part 2: Recovery Plan & Solutions
• Part 3: Main Tactic – Supplier Monitoring & Visits
• Part 4: Tactics specific to NPI & R&D Programs
• Part 5: Miscellaneous Tactics

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Of course, the best solution is to ALWAYS to avoid late supplier deliveries in the first place. In later posts, I will cover techniques to prevent or mitigate risk BEFORE purchase order placement or during the order tracking period.

In these posts, the questions to be answered are:

• If the P.O. Due Date has passed, what can I do get the Supplier to deliver ASAP?
• If the Supplier is late to their own schedule and will obviously not deliver to the P.O. Due Date on time, what can I do to get them back on track?

Bright and early on a Monday morning, you review your Open Order Report. To your horror, you notice that an important purchase order line item is still open. These parts were due last Thursday and Operations has been awaiting them. Your Receiving personnel confirm that the package is indeed physically not there. You call the supplier and your Contact confirms that the parts did not ship last week. Mentally, you run through the “should have” list: I or somebody else should have done this or that. But after the blame game is done, you’re still left with the question of “Now What?”

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Get detailed Current Status

Your internal customers as well as Managers (and possibly Executives up the chain) are going to be unhappy after hearing about a critical late part. Inevitably, there will be questions for a recovery due date as well as other details. You should never be satisfied with just a new due date, especially if the supplier has a history of slipping dates or an unknown quality record. A more proactive approach is to answer potential questions and communicate the delay with more depth.

The first step is to find out exactly what happened. This could be through emails, by phone, in person, or all ways. Details are needed as part of the recovery solution. If the situation warrants it, it’s your job as a Buyer to initiate Root Cause and Corrective Action (RCCA) with the supplier. Consider the journalistic questions during your investigation (Who, What, Where, When, Why, How).

Here are questions you should ask. It may take a series of follow-ups, but make sure your Supplier Contact treats any “check and get back with you” responses with urgency. If the late order has “high visibility”, you may be required to get answers via team meetings or teleconferences.

• When is the New Delivery Date?
• Why are the parts late?
• What is the Recovery Plan for ASAP delivery?
  • What was/will be done resolve the immediate problem?
  • What still needs to be done in order to ship the parts?
  • Are the parts being expedited?
  • Who is/are my Supplier Champions for these parts?
  • Can you agree to a Monitoring Plan until these parts are shipped?
  • What can our Company do to help?

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When is the new Delivery Date?

There may internal pressure to report this right away. If necessary, DO communicate it ASAP but advise that you are working with the Supplier for an improved date and solutions. Otherwise, I suggest gathering more information first.

Make sure the supplier is SPECIFIC on the new due date. Are they really saying that it is a Ship Date (date that it will leave their facility) or a Delivery Date (date that it will arrive at your facility)? Some suppliers consider “due dates” as the date that they’ll ship the product. If so, you must take into account logistics lead time when communicating internally. Operations/Assembly/Program Managers only care about the On-Dock Date.

After the supplier gives you a new due date, ask yourself if it is REALISTIC. Why? It boils down to credibility: your credibility, your Purchasing Department’s credibility, and your company’s credibility to its customers. If your company loses enough credibility due to continual due date slips, customers will look elsewhere for more reliable sources.

So it’s important to make sure that this Recovery Date will be the only and final one. It’s better to “vet” the new date before reporting it internally. You should always push back suppliers on dates that don’t make sense, whether it is sooner or later than what is reasonable. One way to validate it is to see from the supplier’s point-of-view what specifically remains to be done on the parts in order to ship to the new due date. This leads to the next question:

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Why are the parts late?

There are good reasons to know the reason(s) your order is late. If the parts will hold up production or cause late shipment to your customer, I guarantee that you will be asked why they are not in stock yet. Furthermore, your answer will more likely spawn more questions. Be ready beforehand. Without knowing the cause of the delay, in addition, corrective actions can’t be applied to prevent the problem from happening again on future orders. Also, you or your Team may be able to help the supplier solve whatever problem caused or is causing the delay because you have all the facts. Lastly, uncovering underlying causes may ultimately lead to surprising revelations (such as which company or what is truly responsible for late shipment).

When asking your Supplier Contact for the reason for late schedule or delivery, turn on your internal “B.S. meter”. If the response is vague, non-responsive, doesn’t make sense, raises more questions in your mind, or simply makes you suspicious, I suggest you dig deeper.

I recommend an informal version of the “Why” technique. (Technically, it’s the “5 Whys” method, because you’re supposed to ask “Why” five times). This is basically Q&A that explores cause-and-effect in a backwards direction in order to find the Root Cause. Remember that the Root Cause (RC) is the core action that sets in motion the whole cause-and-effect chain that leads to the problem outcome. RC has to be something that can be permanently removed through process improvement.

Here is a sample investigation using this technique to find a Root Cause.

• Buyer: Why haven’t the ordered parts shipped yet?
• Supplier: Because the parts are still in our machine shop (specifically our 5-axis CNC machine) and still will need outside processing and various inspections.
• Buyer: Why weren’t the parts machined earlier in your CNC machine?
• Supplier: Because the raw material (metal) for the parts to be machined did not come in on time.
• Buyer: Why was the raw material late?
• Supplier: Because the mill’s actual lead time exceeded it’s quoted lead time.
• Buyer: Why was their quoted lead time inaccurate?
• Supplier: Because the quote was from eight months ago and, when we received your purchase order two months later, the metal supplier’s business had significantly increased and their manufacturing lead time had increased.

For me, this last answer would lead to the nitty-gritty questions. Why wasn’t the mill’s lead time confirmed again before placing an order? Why wasn’t an attempt made to find another metal source with acceptable lead time? Why wasn’t the Buyer notified back then of the mill’s new lead time and risk of supplier’s late delivery of the machined parts to us? I believe that the supplier’s answers here would lead to good remedy.

In the example above, by the way, I didn’t ask why the metal supplier’s business had significantly increased because I wanted to limit Corrective Action to our supplier’s level. You being a strategic-minded Buyer, however, I think it’d be good to find out why did the metal supplier get a surge of so many orders? Was it because of their actions or, of interest to you, some catalytic event in the metal commodities that may impact future orders that will require the same raw material? If the latter, this is good information for strategic purchasing use. But returning to the topic at hand…

The “5 Whys” technique is one of the tools used in Root Cause Analysis (RCA) or to find Root Cause/Corrective Action (RCCA). RCCA is a step-by-step method of finding the underlying reason that ultimately caused the surface problem (i.e. the supplier is late) and then changing a process permanently to prevent the original reason from happening again. Imposing formal RCCA against the supplier would bring in other Department Reps from your company (such as Quality) and is not necessary for all situations. Formal RCCA should be pushed for or may be required under the following circumstances:

• The ordered P.O. line item is to be the first of several shipments of the same product (as might be reflected in the same P.O. or a contract.
• There is strong potential for re-order in the near future.
• Your company is trying to develop this supplier into more of a partner relationship.
• Purchase order verbiage, terms and conditions, or contractual clauses will require it.
• Your company’s customer has or will likely demand RCCA.

Beware! Your investigation can be a double-edged sword, especially in NPI programs. There were a few times in my Buyer history where a late delivery root cause was actually MY company’s fault and even MY fault! I once discovered that I contributed to a supplier’s late order shipment because I failed to obtain and return an Engineering drawing clarification to the supplier in a timely manner. You can bet that I took my own Corrective Action. (I started tracking supplier clarification requests and Engineering/Quality actions for all my open orders).

I’ll cover RCCA more fully in another blog post.

Once the current status is fully known, you’ll be in a better position to validate the supplier’s Recovery Plan. This will be covered in Part 2.

To be continued. Stay tuned for Part 2!