Practical Techniques for Handling Late Purchase Order Deliveries.
“Shoot the hostage”. The tactics in today’s post remind of that line from the movie, “Speed”. If the supplier’s nonconforming parts or moved out dates cannot be fixed satisfactorily and the order is critical to your project schedule, then consider changes on your end to solve the supplier’s lateness. Such actions would probably not be allowed for production-ordered product but may be acceptable for NPI- or R&D-ordered material. They can be quite effective in resolving or preventing delivery date move-outs.
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
Use these tactics as a last resort only. When the supplier accepted your purchase order, they accepted the terms. This includes the due date, the required quality clauses, and product that conforms with its blueprint or specification. If a supplier screws up, their first responsibility is to fix the problem themselves in order to maintain the P.O. requirements.
Always accommodating suppliers” nonconforming parts or incompetent processes by asking your company associates to make design, BOM, or quality changes (for instance) just enables the same suppliers to continue their poor performance. Plus, these tactics cause more unexpected work for fellow team members (such as Engineers, who have to charge their time to a program). Too much use of these tactics can lead your company to perceive Purchasing not having control of their suppliers. Plus, these extraordinary recovery options are not necessary if the supplier’s revised due dates will still enable the parts to be cleared from inspection and in stock before the next-level assembly start date.
All that said, here are NPI/R&D-oriented options for resolving late orders. By the way, you could also pursue the use of these options well before any procurement in order to prevent the inevitable delays that would occur otherwise.
Drawing Nonconformance Waiver
When a supplier manufactures a first run of new parts for NPI or development programs, there is always a risk of a physical nonconformance compared to the part’s drawing or specification. Resultant lead time slip due to rework or replacement may prevent on-time start of the next-level assembly. If this is the case, you could ask Engineering (via your quality system procedures) to disposition the nonconforming parts for use “as is” if form, fit, or function will not be negatively affected. While successful use of this tactic is uncommon in production programs, it is commonly allowed during NPI early phases or in R&D projects.
Drawing Change for Ease of Manufacturing
If a particular feature for new design parts has not yet been manufactured and the order is running late, the supplier could request minor drawing changes (one-time or permanent) in order to “ease manufacturing”. Doing so would simplify or optimize the design area affected and allow the supplier to make the part quicker and easier. If the changes will significantly reduce supplier time on the parts, you may even have leverage to insist on a lower unit price. Such changes could be handled with your Engineers via “redlined” or revised drawings, one-time or permanently. My past project teams used this option often for machined items, castings, and 3-D printings.
Quality Clause Waivers
Waiving certain standard purchase order quality clauses can improve or restore lost lead time.
- Traceability. One such common clause requires traceability certification for BOM items such as hardware (i.e. nuts and bolts) and electronic products (including circuit board components). That is, the supplier (usually a distributor) must provide manufacturer’s certification with origin info such as a lot number and manufacture date. Hardware or electronics with unusual features (measurements, material, functions) can have super long lead times with risk of due date slippage. Your Team can save the day if paper traceability can be waived (by approving distributor certification only).
- Approved Processor. Some “prime contractor” companies (like Boeing or SpaceX) may require the use of specific Outside processor suppliers, such as platers or painters, that have a backlog with lead times that don’t support. In NPI programs, you might be able to get waiver in order to use a non-approved processor supplier with good quality history but shorter lead time.
- First Article Inspection Report (FAIR). If your company requires ISO or AS9102 FAIRs, the supplier’s inspection lead might be reduced by authorizing the use of their own FAIR form instead. This might result in a noticeable lead time difference if you issued the supplier many orders (different part numbers/same due date) or an order for a complex design item. Check with the supplier if this would be helpful before asking your Quality Contact for waiver.
- Deviation Waiver Request. If they discover a drawing nonconformance before shipping parts, manufacturing suppliers typically have to submit a form requesting formal drawing deviation and your company’s approval (i.e. your MRB Board) thereof. This process can be time consuming and delay the supplier’s delivery (assuming approval is granted). These clauses can be sometimes be waived in NPI/R&D projects by handling the process informally. For example, you the Buyer could forward an email request (with illustrations) from the supplier to the program’s Design or Project Engineer. If approved, they reply back, keep your Quality Specialist in the loop, and the supplier is no longer delayed to ship the parts. I do recommend having the supplier notating the discrepancy on their certification or packing slip and I do recommend that the discrepant parts do be written up when they hit receiving inspection. Since the discrepancy is pre-approved, the MRB clearance will be faster.
Alternate Part Acceptance
If a late item ordered has a manufacturer, catalog, or industry standard part number (in other words, is not customized), then you could request Engineering and Quality to authorize purchase of an alternate or substitute part number that has shorter lead time. This could be a one-time or permanent change that might require a Bill of Material (BOM) change on your next level assembly. This is common in early development programs so long as fit, form, or function changes are nil or acceptable.
What to do with an open purchase order for the product with late or unacceptable lead time? You could ask the supplier or distributor to cancel the order with attempted waiver of restocking fees. If that can’t be done, you can explore keeping the order open if there will be a need for it later in the program. If not, ask your Project Manager if the materials budget could absorb the cancellation cost.
Electronic components or hardware (such as nuts and bolts) are common candidates.
- Electronic parts. Alternative but acceptable part numbers could have differences such as packaging, color, wire lengths, size, attachment configuration, non- vs RoHS compliance, or function tolerances. There could also be alternate manufacturers with better lead time for product with the same vital functions. If your supplier or the manufacturer can’t provide suggested substitutes, I suggest consulting your Electronics Engineer. You might want to forward them a copy of the data sheet of the late part number.
- Hardware. If the initial assembly design requires industry standard hardware (i.e. part numbers that begin with NAS, MS, AN, etc.) and a supplier pushes out their due date, you could ask Engineering if they can accept comparable non mil-spec hardware (such as those from McMaster or similar distributor). You could also ask for temporary alternate part numbers with variant features, such as plating type, length, and material. If the next level design calls for hardware with uncommon measurements (i.e. long lead time), you could ask if the interfacing material could be changed to accommodate hardware with common measurements (i.e. short lead time).
Flexible Planning Adjustments
Behind every good NPI Buyer is a a good NPI Planner. Due to evolving design in new program early phases, the two roles need to work closely together to prevent supply chain errors. (In fact, some companies just combine the two roles or key functions into a new role). If all Buyer efforts are exhausted in trying to recover a critical late part delivery, the Planner may be able to use their administrative tools to accommodate the late receipt while ensuring the final product is still shipped to the customer on time.
- Material Reallocation. Borrow from Peter to pay Paul, as the saying more or less goes. If the missing part number is shared across programs, the Planner could transfer stock material from a project that doesn’t need it yet and replenish it with the same material that is late (assuming that it will still arrive in time to not impact the other program schedule).
- Subassembly Builds, Partial or Advance. Depending on what stage the late part is needed in subassembly build, the Planner could (a) build some subassemblies in advance when parts lists are fully stocked or (b) build the next level subassembly as far as possible pending receipt of the late part. This results in shortened assembly lead time to help make up for the delayed parts receipt.
- Buy-to-Make Part Change. This is normally an activity that should be done strategically and prior to procurement. If your facility has manufacturing capabilities (like machining, casting, injection molding, or other), however, having the part made in-house instead (especially of a simple design) could save the schedule slipping due to a critical late part. Your only problem then would be whether or not to keep the purchase order open or cancel it without repercussion. This option requires new planning paperwork, possibly ordering raw material, and floor shop coordination and scheduling.
Program Requirement Adjustments
When your customers order new or development product, there are often design or functional requirements that will evolve or change until the design is frozen as a result of qualification testing completion. A late schedule on a supplier’s new complex product may be a symptom of faulty specifications that originated either from your Engineering side or the customer’s end. For example, the customer may have an unnecessarily restrictive function requirement for the thing that they ordered from your company that is affecting the electronic item prototype subcomponent that you ordered from your supplier. This may be causing trial-and-error activity that leads to continual delivery date slippage.
When the supplier brings up technical issues, involve the appropriate Engineering Contact and investigate for the root cause via joint meetings. If your customer’s specification is found to be contributing to the problem, it’s time to also involve the Program Manager. In the end, the solution may result in negotiation or request to the customer to relax or change their specification that is somehow causing your supplier’s subcomponent to be late. Another option is to ask the customer to move out their purchase order due date in order to accommodate the supplier’s revised delivery date.
These tactics require clear understanding and agreement from your Program Manager and applicable Engineer. (Likewise, you’ll have to sift through a lot of technical jargon but, hey, it never hurts to become smarter). Such requests to the customer are especially justifiable if the technical requirement:
- Was not in the Proposal Quote to the Customer.
- Came up later in the program and after Customer’s purchase order acknowledgment by your Company for your top assembly product.
- Was formally treated by your Company and contractually acknowledged by the Customer as a risk item after their purchase order issuance.
Summary – USE THESE TACTICS SPARINGLY!
Late purchase orders should be handled using strategic and tactical supply chain techniques as much as possible. Though the options above are effective, they will divert unplanned labor and time from your NPI colleagues. In turn, this may cause the program to fall behind schedule and still cause late delivery of our own product to the customer. Plus, Program Managers and Engineers have to charge their time to the program so too much unplanned activity could cause the program to go over budget. Overall, use them as a last resort, toward preserving overall delivery and quality to your customer, and for component parts improvement.
In Part 5 of this blog, I cover the final group of tactics that you could use to handle late supplier orders.
To be continued. Stay tuned for Part 5!
NPI Supply Chain Craft 
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