NPI Supply Chain Craft

Practical Techniques for Handling Late Purchase Order Deliveries

In Part 1, I gave a checklist for handling orders that are discovered to be already late or that will be late based on their current status. The obvious first step is to get detailed status from the supplier.

The next question to ask is: What is your Recovery Plan?

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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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Agree on a Recovery Plan

You should insist on a Recovery Plan from the Supplier that will address the following:

• A solid remedy to whatever caused delay on delivery.
• Corrective action(s) in order to prevent late delivery on follow-on orders (if deemed necessary).
• Remaining processes required in order to ship the parts (i.e. a schedule).
• If the late order is being expedited.
• The Supplier’s “Champions” for your order.
• An agreed Monitoring Plan.
• Assistance from your company.

This doesn’t have to be anything formal, however, I would get the supplier’s commitments in writing via email or recorded minutes of a teleconference.

Speaking of telecons, a team meeting with the supplier to discuss the Recovery Plan might be more appropriate if the late order will severely impact upcoming company revenue (i.e. might cause your company to ship a high-dollar value order late). If your own Leadership doesn’t already push this, it’s a good idea to get other key stakeholders involved (such as representatives from your Management, Operations, Quality, Engineering, etc.). The idea is not that you’re flying solo trying to get the supplier back on track, but that you’ve got a team working with you and the supplier to help them get back on track. Another benefit is that there is less likelihood of miscommunication because key people on your side will hear the same information and you’ll reduce the “why doesn’t the Supplier do this or that” questions.

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Remedy (short term fix) and Corrective Action (long term prevention)

A good supplier will conduct their own RCCA investigation when something happens that they know will cause late shipment of your order. They’ll notify you with advance warning; you won’t have to find out by surprise. They will not only call you with the problem but also with the solution. If necessary, their Corrective Action will accurately address the underlying cause in a permanent way that prevents it from ever happening again. They also will anticipate other questions or concerns you or your company may have and already know the answers. When you have a Supplier like this, treasure them! Foster your relationships with them into partnerships.

Once the supplier has identified the cause(s) of the late order, otherwise, you and/or your team should discuss and validate their solution. As stated earlier, not all problems need a formal Corrective Action. If this is a one-time order (one P.O. line item) with no definite follow-on orders or a supplier whom you’ll probably never use again, a one-time or temporary fix may be all you need. I like to call them remedies. A remedy is a means of counteracting or eliminating something undesirable; in this case, a late schedule. Such actions could involve rework, repairs, replacements, and expedite.

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Remaining steps to ship the parts (recovery schedule)

Ask for this information in terms of steps or processes. If you ordered an off-the-shelf item, the details may be limited. Otherwise, try to get a Gantt Chart (MS Project or other software) or an MS Excel sheet that shows the specific processes required in order to get the parts from their current status to the desired status (on your dock). Alternatively, simply get an list of the final steps involved. Here is the basic information to look for:

• Ordered Part Number and Description
• Quantity
• Each major process (e.g. machine, deburr, clean, WIP inspection, outside passivation, receiving, final inspection, ship to customer, shipping transit time)
• Duration (lead time) for each process
• Completion date (projected) for each process
• Sub-component shortages (part description and due date to Supplier) that caused your ordered part to be late

Read through the schedule and ask yourself if the lead times for each process make sense. Obviously, the more technical knowledge that you have or can consult, the better you’ll be able to judge. If a Supplier says that it will take 3 weeks to machine a particular part, for example, it will be helpful if you’re able to read a mechanical drawing or can consult a Mechanical Engineer or Machinist in order to validate their claim. If the new schedule reveals an electronic subcomponent that’s not due to them until 6 weeks later yet an online search shows off-the-shelf availability, you should question it. If their schedule shows a recovery delivery in one week but there are 15 remaining processes, it should be red-flagged as another probable date slip until you can have the Supplier explain or change it to your satisfaction.

Remember that your internal customers (especially Managers and Execs) may challenge new due dates, especially on late parts that are putting the company’s own product shipments late. Be prepared to explain. Don’t send out revised PO due dates until you are confident of them yourself.

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Expedite and Overtime expectations

Earlier I mentioned that an unexpected consequence of RCCA may be the discovery that you (the Buyer) or your company contributed to or were the root cause of the Supplier’s late shipment. In the interest of supplier relations, it behooves you to make sure of supplier fault before insisting that they have their people work extra shifts and weekends or that they pay all their outside processors expedite fees.

If the delayed order clearly originates from the supplier’s side, then it is reasonable to expect them to pay expedite fees and use overtime as needed. Instead of using a blustering bully approach, I suggest a diplomatic and subtle one (at least to start). Give the supplier a chance to admit fault and let them tell you what they will do to make up for lost lead time. You don’t want to unnecessarily damage the supplier relationship because it will hurt you over the long run. Inevitably, there will come a time where will you ask your supplier to step up over and above their normal business obligation. Your Contacts will remember how they were treated, whether good or bad, in episodes such as this.

If the supplier implements expedite and/or overtime measures that will result in an acceptable revised date or get the order back to its original delivery date, then I suggest to leave it at that (assuming the measures are valid and doable). There is no need to push them further as, believe it or not, pushing a supplier hard continually and with constant pressure could backfire. Just be sure that they and you have a good monitoring and reporting plan.

If the subject doesn’t come up, here are some options you could bring up to make sure they are committed to the recovery plan.

• Can the job be run on a swing shift or graveyard shift?
• If your company only has a day shift, could key personnel for the applicable operation be brought in after hours or on a Saturday?
• If applicable, could in-house lead time be reduced by assigning more resources (people/workers) to our job?
• Since it is late, does our job have priority in-house (as opposed to other Customer jobs that are early/not late)?
• If a sub-component is running late, have you tried applying all leverage on your supplier, including expedite fee?
• For any remaining outside processes, will the Supplier accept an expedite fee that would significantly speed up the process?

Keep in mind that abnormal actions above bring quality risk and, subsequently, more delivery risk. How? Internal pressure from the supplier’s management to the actual personnel working your job or their suppliers could cause carelessness or oversights in the interest of speed. The risk increases in after hours scenario and could result in an incident of nonconforming parts (such as accidental damage or an item incorrectly machined or assembled because a knowledgeable supervisor wasn’t around to clarify something and the worker moved ahead at risk). So make sure that the supplier plans for such risks and anyone working overtime is well-informed.

Inevitably, you will have suppliers who refuse to expedite or do overtime for a variety of reasons. It may be “against their policy”. They may adhere to a strict production and capacity schedule. They may have the “your order is a drop in the bucket” mentality. While there are a few tactics that you can attempt (which will be in Parts 4&5), your best bet with this type of supplier is prevention. In a later post, I will discuss ways that you can strategically reduce the risk of late deliveries with such sources.

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Supplier Champions for the late order

Always make sure that you know who will be the Supplier Champions for your late parts. This is the person who will be accountable and instrumental in keeping your order moving per the Recovery Plan. In some cases, this could be your primary Contact, such as a Customer Service Rep (CSR), a Sales Rep, an Operations Rep, a Manager or Director, etc. Whenever group teleconferences or meetings are involved, however, you’ll often learn of other key people on the supplier end. This could be a particular Engineer or Quality Specialist or Supervisor. It’s also a good sign to have the Supplier Management involved, if not directly then at least peripherally.

Once these key people are publicized, it is important to respect the protocol of communications. Normally, you (the Buyer) and your Primary Supplier Contact should be the ONLY focal point of communications between the two companies. So if someone higher in your chain of command wants to speak to another Manager or Executive with the supplier, they should arrange it through you or at least keep you in the loop. If your company Engineers or Quality specialists want to relay important info, they should do it through you or with you (via phone call or email). Same goes for personnel with the Supplier who want to pass info to their counterparts on your side.

The reason behind this is not for you to be a control freak but rather to fully know the recovery status at any given moment. Managers and internal customers will be regularly pinging you for status. When other people start bypassing you or your Supplier Contact, it will lead to confusion, misinformation and, quite possibly, a derailed schedule or quality issue.

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Mutually agreed Monitoring Plan until late order is delivered

After the Supplier Contact has given you a recovery plan and some kind of schedule, agree on how status shall be monitored until completion (the point when the parts are on your dock). Factors to consider include the “lateness” of the order or personnel other than yourself or your Supplier Contact that need to be involved.

• Frequency of status update – Monthly, weekly, twice a week, daily?
• Days and times – acceptable for all parties
• Deliverables – updated schedule? email update? updated drawings or specs as a result of the Recovery Plan?
• Status Method
  • Emails or video/phone calls between Supplier Contact and Buyer only?
  • Regular telecons/meetings between Supplier Team and your Company Team?
• Participants for team meetings – Supply Chain Manager, Executive Leader, Project Manager, Quality, Engineering, Operations, Planning?

After agreement, you the Buyer should be the “Driver”. That is, you should set up and send out the meeting invitations for telecons, set digital “due date” reminders for document deliverables, ensure key people attend meetings, etc. If you’ll be the only point-of-contact, needless to say (but saying it anyway), be disciplined about relaying all Supplier updates to all team members and internal customers who need to know.

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Mutually agreed ways that your Company can help the Supplier

When a supplier states that they’ve done everything they can in coming up with the revised delivery date, you can always ask the “What can we do to help” question. Enabling them to improve the revised date is especially beneficial if the ordered items will definitely cause late end product shipment to your own customer. For NPI programs, I especially like to explore this option as there may be more flexibility on drawing, testing, and quality requirements.

Here are sample ideas to consider offering:

• If the parts are at an outside processor and they won’t move in the due date, can we call that supplier ourselves and see if they’ll move them in? (Applies only if your company does a lot more business with that supplier).
• If the problem is a capacity issue at your facility and we have a lot of jobs there, would it help if we provide you a priority list?
• Would making some subcomponent or testing changes on your internal design (that require our company approval) be helpful in reducing significant lead time? If so, can you send suggestions ASAP so we can validate that they won’t cause drawing or quality nonconformance issues on our end?
• Are there any particular P.O. Quality requirements that could be waived resulting in significant direct or indirect lead time on your end?

It’s better to brainstorm options after you and your team have obtained all investigative and schedule information.

In Part 3 of this blog, I will cover Supplier Monitoring tactics to help the Supplier on improving revised due dates.

To be continued. Stay tuned for Part 3!