We recently approved a level-2 PSW for one part and we instructed our supplier to go ahead and make 20,000 parts. Now during our assembly, we find that the parts don't meet the plating spec on our drawing. The supplier never asked us to explain the spec and we never told them to deviate from this spec.

Now our supplier argues that since we approved the PSW, we should be responsible for these defect parts. We argue that they should take all the responsibility since they didn't meet the spec on the drawing.

Thanks for your input.

We recently approved a level-2 PSW for one part and we instructed our supplier to go ahead and make 20,000 parts. Now during our assembly, we find that the parts don't meet the plating spec on our drawing. The supplier never asked us to explain the spec and we never told them to deviate from this spec.

Now our supplier argues that since we approved the PSW, we should be responsible for these defect parts. We argue that they should take all the responsibility since they didn't meet the spec on the drawing.

Thanks for your input.
The warrant you approved presumably stated that the supplier met all of the requirements and specifications. Unless the supplier offered an explicit disclaimer with regard to the plating specifications, the supplier should be responsible for the nonconforming parts.

There may be a middle ground here.
What exactly did the customer do as its approval for the PSW? Did it look at a plating cert? What did the cert say? Did it test the part functionally? What happened? What is different in the production process than in the approval process that the plating difference was not noted until production? Did the supplier do plating in-house or outsource? Did he rely on the expertise of his plating supplier to meet the spec? How bad is the plating difference? Does it render the part nonfunctional? Any chance of a one-time waiver? Can the parts be stripped and replated? etc. ad infinitum.

Frankly, I always spent my time looking for solutions instead of someone to accuse or blame. I lasted a pretty long time and I don't have any former suppliers who would like to catch me in a dark alley and no bosses who thought I was a wuss. Even the customers I fired were willing to give me referrals.

Thank you guys for the quick reply.

To JSW05:
Supplier didn't offer any disclaimer with regard to the plating spec.

To Wes Bucey:

Supplier provides us a plastic part with brass terminal pin insert molded.
The drawing for the terminal pin requires copper flash and tin-lead plating to the brass. The supplier misunderstood copper flash and didn't plate a thin layer copper to the brass. It then did the tin plating alone without any lead.
Before we approved the PSW for both the plastic part and terminal pin, we
did all the PPAP requirement for the plastic part but didn't analyze if the plating is correctly done. We assumed the supplier has the knowledge. It turned out the supplier outsourced the terminal pin.

Only when we welded this part with other components during our production, we found out the welding problem. Then we analyzed the terminal pin and found out no lead or no copper flash are performed. Due to the welding problem, we can't use the whole part. The pin can't be replated either since it's already molded with plastic.

When we pointed out to our supplier that they didn't follow the spec. They argued that they made the parts after we signed PSW.

The issue here isn't just the loss dispute since the total amount isn't that big. However, we want to know under this situation, who should take the responsibility? This is important because if it happens again in the future for much large loss, legal process may be called in.

I think this kind of situation should be common in automotive industry where multi-tier suppliers are widely used for many components.

We sincerely welcome your help.

It seems to me as a dispassionate observer that the customer needs to beef up its approval process to the point of requiring material and plating certifications PLUS functional testing of samples for suitability for intended purpose.

I still think the emphasis should be on resolving the root cause of what went wrong and fixing that without rancor or haste to assess blame. The fact that I (as a subcontractor who may have supplied the pin in question) would have routinely supplied a plating cert to the Standard called out on the print (whether the cert was requested or not) is immaterial because it is well known that I am obsessive about details like that.

The burden was clearly on the customer to identify critical characteristics, such as plating, which would affect the use of the product, and to put assurances in place to guard against nonconformance. Part of those assurances is to communicate the criticality of the characteristic to everyone in the supply chain.

I see no reason to demand the supplier be penalized for not reading the customer's mind. I certainly would not bring this issue to court if I were the customer - there is a possibility the supplier could prevail because of vague or ambiguous requirements and juries could construe the burden to be on the customer who gave a written approval of a product and neglected to test for functional suitability or did not require a certificate of plating conformance from the plater. At the best, the customer would take a chance of looking foolish in public for NOT being obsessive about details.

Thanks Wes for the good advice.

I have shared your message with some of our QA team. They corrected me with the functional test we did before approving PSW. The PSW was approved about 5 months ago when terminal pin with tin-only passed our functional testing (welded to other parts and tested). Due to other issues with the project, production got delayed until last month. Five months later, the welding started to fail significantly. The reason could be oxidation.

The spec is very clearly stated as "Finish: A. Copper flash .0001 max thick before tin-lead plate. B. Tin-lead plate (electrodeposited) per mil-P-81728 .0003-.0005 thick bright finish."

Therefore our QA team believes that the supplier should be solely responsible for this issue. Since the supplier is the one who submitted PSW, they carry the liability for any nonconformance. As a customer we can't analyze and verify all the aspects such as material and plating detail. If the material fails and we find the material isn't as specified, the supplier will be responsible. The plating is similar. Although the ideal case is that we analyze the plating detail, we rely on supplier to conform to our spec. FYI, during the PPAP, we did obtain all the material certification on plastic and pin except the plating certificate. And the supplier should require a certificate of plating from its subcontractor.

Back to the legal issue, if the current issue caused multi million dollar loss, wouldn't the supplier be liable?

Wes,

Do you think we should consult a product liability lawyer specialized in automotive industry?

We want to clearly understand our liability so that we can improve our process dealing with suppliers and prevent big dispute in the future.

Thanks Wes for the good advice.

I have shared your message with some of our QA team. They corrected me with the functional test we did before approving PSW. The PSW was approved about 5 months ago when terminal pin with tin-only passed our functional testing (welded to other parts and tested). Due to other issues with the project, production got delayed until last month. Five months later, the welding started to fail significantly. The reason could be oxidation.

The spec is very clearly stated as "Finish: A. Copper flash .0001 max thick before tin-lead plate. B. Tin-lead plate (electrodeposited) per mil-P-81728 .0003-.0005 thick bright finish."

Therefore our QA team believes that the supplier should be solely responsible for this issue. Since the supplier is the one who submitted PSW, they carry the liability for any nonconformance. As a customer we can't analyze and verify all the aspects such as material and plating detail. If the material fails and we find the material isn't as specified, the supplier will be responsible. The plating is similar. Although the ideal case is that we analyze the plating detail, we rely on supplier to conform to our spec. FYI, during the PPAP, we did obtain all the material certification on plastic and pin except the plating certificate. And the supplier should require a certificate of plating from its subcontractor.

Back to the legal issue, if the current issue caused multi million dollar loss, wouldn't the supplier be liable?That's why they have trials - to determine who is liable. That said, I know plenty of attorneys who would take the supplier's case with an expectation of winning or forcing a favorable settlement.

One of the things you haven't produced yet is expert testimony from some metallurgists who can demonstrate the failure is solely due to the lack of copper flash. There are many mitigating factors for the supplier inherent in the data you lay before us. If it were my call to make, I'd look at making the supplier an ally and jointly look for the root cause of the failure - plating error? or too long between plating and production? improper storage at customer's inventory prior to production? etc. rather than waste time, money, and energy looking for a fall guy.

Wes,

Do you think we should consult a product liability lawyer specialized in automotive industry?

We want to clearly understand our liability so that we can improve our process dealing with suppliers and prevent big dispute in the future.Sorry, I missed this one -
Make sure you have all your facts straight before you involve an attorney. Most good attorneys will tell you to do that before they will proceed on the case - the difference is that their meters will be running at the same time, adding to your cost.

I have seen several cases where plaintiffs pulled the trigger before they had their facts straight and ended up a lot poorer with egg dripping off their chin when defendants successfully countersued and won. I have seen a lot more cases where plaintiffs have sued and settled the case during the discovery process when deposing expert witnesses, having learned the plaintiff's position was not rock solid.

Litigation is the last resort, not the first, for smart organizations.

Sorry, I missed this one -
Make sure you have all your facts straight before you involve an attorney. Most good attorneys will tell you to do that before they will proceed on the case - the difference is that their meters will be running at the same time, adding to your cost.

I have seen several cases where plaintiffs pulled the trigger before they had their facts straight and ended up a lot poorer with egg dripping off their chin when defendants successfully countersued and won. I have seen a lot more cases where plaintiffs have sued and settled the case during the discovery process when deposing expert witnesses, having learned the plaintiff's position was not rock solid.

Litigation is the last resort, not the first, for smart organizations.Having written this first post, I now recognize you may have been asking about referring to a product liability attorney on general principles, not just allied with this plating issue. The more encompassing answer is there are risk assessment firms, some free services by product liability insurance companies and some not-for-profit trade associations who can provide plenty of information about risk proofing your organization, its products, and services from liability,

I would first start with my insurance carrier and keep asking for referrals.

Think of lawyers as kids with hammers - everything looks like a nail! To a lawyer, a primary paycheck comes from litigation and correction, not investigation and prevention.

Thanks for the advice again. Yes, we're trying to learn lessons from this case and understand the general principles.

Of course, right now the supplier is willing to bear half of the loss but our upper management doesn't agree. It wants the supplier to absorb all the loss because the failure is for sure due to supplier's nonconformance to the spec.

I agree with you that we should treat the supplier as an ally and jointly look for the root cause of the failure. However our upper management wants to enforce the general principles to the supplier so that they will learn a hard lesson as well. The supplier is offshore and quality control isn't as strictly enforced as in U.S. even it is certified by TUV and audited by our QA team.
If they continue to think their nonconformance to spec doesn't expose them any liability, they wouldn't take the lesson very seriously. As I mentioned earlier, if the loss is very big, our company will sue the supplier for sure.
Therefore if our supplier understands that by signing PSW it is liable for any nonconformance to spec, they would be very careful. Many people in our organization strongly believe that the supplier would lose the case had we taken it to the court. I believe too. Do you?

Thanks for the advice again. Yes, we're trying to learn lessons from this case and understand the general principles.

Of course, right now the supplier is willing to bear half of the loss but our upper management doesn't agree. It wants the supplier to absorb all the loss because the failure is for sure due to supplier's nonconformance to the spec.

I agree with you that we should treat the supplier as an ally and jointly look for the root cause of the failure. However our upper management wants to enforce the general principles to the supplier so that they will learn a hard lesson as well. The supplier is offshore and quality control isn't as strictly enforced as in U.S. even it is certified by TUV and audited by our QA team.
If they continue to think their nonconformance to spec doesn't expose them any liability, they wouldn't take the lesson very seriously. As I mentioned earlier, if the loss is very big, our company will sue the supplier for sure.
Therefore if our supplier understands that by signing PSW it is liable for any nonconformance to spec, they would be very careful. Many people in our organization strongly believe that the supplier would lose the case had we taken it to the court. I believe too. Do you?
I guess it would depend on which venue the case is brought. If the supplier is offshore, are you going to be able to enforce any judgment?

I think your managers are being too myopic here. If they dealt with an off-shore supplier to save money, they sure didn't do much to protect themselves did they? If I were a stockholder, I'd be more interested in getting good product to sell rather than be distracted by a relatively minor issue like this. The only lesson a lawsuit will bring is for the supplier to dump you as a customer. Life is too short to deal with a litigious customer. Some surgeons subscribe to blacklists of known litigious patients and refuse to take them as new patients. Is that the kind of reputation your bosses want with off-shore suppliers?

Plainly, bluster and loud voices don't win trials. Saying a thing is true doesn't make it true. If it were my call, I would gladly accept the 50% offer, since both customer and supplier have blame. Why pay for a costly lawsuit to decide how much? The rule in civil cases is that if a judge or jury finds partial liability for each party, the judgment is split that way. Hence if a guy jaywalking across the street gets hit by a driver who was distracted because he was talking on a cell phone, a judge or jury might reasonably say each was liable to the same degree and require each party to pay half the cost.

We are starting to stray into the area where companies pay me big bucks for helping determine strategy and I will have to limit my answers from here on. I have been as forthcoming as I could under the circumstances.

Therefore if our supplier understands that by signing PSW it is liable for any nonconformance to spec, they would be very careful. Many people in our organization strongly believe that the supplier would lose the case had we taken it to the court. I believe too. Do you?

This seems to be open and shut insofar as the value of the parts themselves is concerned. You clearly specified plating that wasn't done. The supplier warranted that it was done. You accepted the supplier's warrant in good faith. No contest.

Now: liability for damage done that you might claim was due to the plating (or lack thereof) is another issue. As Wes suggested, you would need to be able to show that the supplier's failure to properly plate the parts was the cause, to the exclusion of other possible causes, which would be an expensive proposition. I will also agree with Wes when he tells you that litigation should be your last resort. Unless there is lots of money involved, it rarely does anything except leave everyone wishing they hadn't done it. Everyone except the lawyers.

After over 10 posts I'm still very confused.

Let's forget about litigation and let's forget about the difficulty of taking litigation against offshore supplier. We understand this very well. No brain there.

However, the tricky part is the conclusion of this case. Given the situation, I just want a clear statement of your position. I believe that the conclusion from this case would be helpful to many subscribers of this forum.

JSW05 in the very beginning told me that "the supplier should be responsible for the nonconforming parts".

Now the new message of "... No contest" confused me. Did you change your position now? Do you still think it's the supplier to blame?

As for Wes' replies, I can't understand exactly his position. From his last message, he seems to suggest both sides should be blamed. Why should we get blamed? Is it because we didn't request the plating certificate?

I think the clear-cut positions are one of the following:
1. supplier to blame;
2. customer to blame;
3. both to blame.

I take 1. What about you? Let's make it short and simple.

After over 10 posts I'm still very confused.

Let's forget about litigation and let's forget about the difficulty of taking litigation against offshore supplier. We understand this very well. No brain there.

However, the tricky part is the conclusion of this case. Given the situation, I just want a clear statement of your position. I believe that the conclusion from this case would be helpful to many subscribers of this forum.

JSW05 in the very beginning told me that "the supplier should be responsible for the nonconforming parts".

Now the new message of "... No contest" confused me. Did you change your position now? Do you still think it's the supplier to blame?

As for Wes' replies, I can't understand exactly his position. From his last message, he seems to suggest both sides should be blamed. Why should we get blamed? Is it because we didn't request the plating certificate?

I think the clear-cut positions are one of the following:
1. supplier to blame;
2. customer to blame;
3. both to blame.

I take 1. What about you? Let's make it short and simple.
As I wrote - we are getting into the area where folks pay me big bucks to help them determine strategy.

Look at the situation from the supplier's point of view - he took it on faith from HIS supplier (as you did) that the plating was according to spec. He is shocked and dismayed to learn months after delivery that a problem has cropped up. There is no proof yet that the plating is to blame (lots of smoke - no proof for court, yet), but if it is, your supplier has been done dirty by the plating supplier. You are dealing in a foreign country. Problems in translation could occur anywhere along the line. As the customer, you should have anticipated such problems and put in failsafe measures to protect yourself against such errors. If you go to trial, the supplier may be able to successfully shift blame to plater who probably does not have deep pockets to defend at trial, let alone pay a judgment. Depending on what country the suppliers are in, they might just as easily close up shop under one name and reopen under a new name five minutes later, leaving plaintiff sucking gas.

I'm telling you the pragmatic approach. If some big exec in your company has his ego on the line for OKAYing the off shore outsource, he's really the guy who should be taking the heat for not :ca: for the customer in this deal in advance.

I'm giving you as straight and pragmatic advice as I would give for my normal fee. You may not be high enough on the totem pole to know all the egos on the line here, but I assure you the ostensible purpose of teaching the supplier a "lesson" is smoke blowing up someone's nether regions. The harshest lesson would be to take the sop of half the money and drop the supplier from the approved list. Anything else has no further benefit to the customer.

JSW05 in the very beginning told me that "the supplier should be responsible for the nonconforming parts".

I'm still saying that.

Now the new message of "... No contest" confused me. Did you change your position now? Do you still think it's the supplier to blame?
Who are you asking? I never said anything about "blame." Forget about blame. Blame is for losers.

As for Wes' replies, I can't understand exactly his position. From his last message, he seems to suggest both sides should be blamed. Why should we get blamed? Is it because we didn't request the plating certificate?

Wes has already responded, but I'll add that it appears that there is indeed some responsibility on both sides, and I'm not contradicting myself in saying that. Part of the risk involved in this sort of offshore purchase is inherent in the distances involved. The supplier knows exactly how far away he is, believe me. And he also knows that your company came to his in the beginning for one reason: price. And he also knows that people who are concerned primarily with price are often ignorant (or daring) when it comes to cost. He has you over a barrel at this point, I'm afraid, but someone should have seen it coming.

I think the clear-cut positions are one of the following:
1. supplier to blame;
2. customer to blame;
3. both to blame.

I take 1. What about you? Let's make it short and simple.

OK--short and simple.
1) The supplier is responsible for not making the parts to print, regardless of sub-tier screwups. This is unequivocal and undeniable, and I don't charge anyone big bucks for common knowledge.
2) Good luck collecting.

Thanks JSW05. You made yourself very clear and I like your style and also happen to agree with you.

Wes, you ducked my question again. I'm not sure if you're required not taking any firm position because you're hired by some folks.

I can assure you that the plating is to blame since our analysis shows no lead and copper in the plating. No contest here. Plus supplier agreed their wrong doing too. Or let me put it this way. Let's assume it's proved that the plating is to blame for the moment.

We don't need to translate the spec since the supplier isn't a small shop. Even if it shifted the blame to the plater, it still has to take the responsibility since we don't do business with the plater.

Also the case has nothing to do with ego. We're trying to clarify some general principle in the business world.

I do like you one last advice. We may need to drop the supplier. However, we have a few ongoing projects with this supplier, dropping it takes some time.

What we really try to achieve is to let the supplier understand that in principle it should take this responsibility and could lose in the court if it doesn't learn lesson from this case (assuming there is no cross border barrier for legal litigation). Of course we'll take extra steps in jointly working with offshore suppliers and continue to improve our QA procedure.

2) Good luck collecting.
Absolutely the one thing Jim and I agree on!

I normally get hired by Boards of Directors or Creditor committees to look at mistakes made WITHIN the corporation which allowed the corporation to get into a mess. Then to give advice on how to get out of trouble with as whole a skin as possible. I won't take the job if there are any sacred cows who are "off limits." Everything you are telling me about the attitude of your managers suggests they think they are sacred cows and off limits. Would the Board of Directors or a stockholder's committee have the same blinders? Maybe, but I doubt it. You are caught in an untenable position and I sympathize with the stress and pressure you must face each day. You are not the first to be caught in the middle, nor will you be the last.

If I seem callous, it is because every issue you face could have been prevented by a strict Failure Mode and Effects Analysis (FMEA) at the beginning which included "what if the supplier misinterprets the requirements?"

Add to that a cross-functional team which could have done a very thorough Contract Review, which might have included requesting certificates of ANALYSIS, not just Certificates of Conformance, because many organizations merely consider a C of C as meaningless boilerplate without real consequences.

During engineering, FMEA, or Contract Review, certain critical characteristics necessary for fit or function should have been identified and made clear to all parties in the supply chain.

Note none of these items are my own creation. These activities have been prescribed in thousands of situations and formally incorporated in Military Standards from 60 years ago, upon which many current Quality Assessment procedures are based.

In another thread, I wrote about the idiocy of a foreign manufacturer who made a very functional stainless steel whistling teakettle I acquired. Imagine my consternation to discover the whistling cap had an unplated plain steel rivet which oxidized badly in the first weeks I had the kettle. My correction was to drill the offending rivet out and replace it with a proper stainless steel fastener. There was no corrective action or preventive action because I have no way of contacting the original manufacturer to offer a suggestion for CA/PA, having thrown the original carton out the first day. The carton clearly said "100% stainless steel" - the equivalent of a certificate of conformance. However, there were no certificates of analysis nor results of a salt spray test nor even a test with distilled water (from steam) which is more damaging than plain tap water in oxidizing plain steel.

If I were to follow the theory of your bosses, I would file suit against my brother-in-law, who was my supplier.

I think the clear-cut positions are one of the following:
1. supplier to blame;
2. customer to blame;
3. both to blame.
I take 1. What about you? Let's make it short and simple.
I take 3.
The supplier provided you with parts not to print. You tested them and couldn't tell the difference and so approved them. 1 ball/1 strike
The reason could be oxidation.
Bingo! Tin oxide doesn't weld or solder as well as tin. Tin/lead alloy plating is not nearly as sensitive to improper storage (allow parts to oxidize = 2 strikes for you).
I also agree with Wes:The harshest lesson would be to take the sop of half the money and drop the supplier from the approved list. Anything else has no further benefit to the customer.You should both learn a lesson from this. Trust but verify! A discussion, up front, with the supplier about the Key Characteristics of this part would have saved you a lot of trouble. If you weren't clear, strike 3. In the end you are SOLELY responsible for sending good parts to YOUR customer.

Absolutely the one thing Jim and I agree on!

I normally get hired by Boards of Directors or Creditor committees to look at mistakes made WITHIN the corporation which allowed the corporation to get into a mess. Then to give advice on how to get out of trouble with as whole a skin as possible. I won't take the job if there are any sacred cows who are "off limits." Everything you are telling me about the attitude of your managers suggests they think they are sacred cows and off limits. Would the Board of Directors or a stockholder's committee have the same blinders? Maybe, but I doubt it. You are caught in an untenable position and I sympathize with the stress and pressure you must face each day. You are not the first to be caught in the middle, nor will you be the last.

If I seem callous, it is because every issue you face could have been prevented by a strict Failure Mode and Effects Analysis (FMEA) at the beginning which included "what if the supplier misinterprets the requirements?"

Add to that a cross-functional team which could have done a very thorough Contract Review, which might have included requesting certificates of ANALYSIS, not just Certificates of Conformance, because many organizations merely consider a C of C as meaningless boilerplate without real consequences.

During engineering, FMEA, or Contract Review, certain critical characteristics necessary for fit or function should have been identified and made clear to all parties in the supply chain.

Note none of these items are my own creation. These activities have been prescribed in thousands of situations and formally incorporated in Military Standards from 60 years ago, upon which many current Quality Assessment procedures are based.

In another thread, I wrote about the idiocy of a foreign manufacturer who made a very functional stainless steel whistling teakettle I acquired. Imagine my consternation to discover the whistling cap had an unplated plain steel rivet which oxidized badly in the first weeks I had the kettle. My correction was to drill the offending rivet out and replace it with a proper stainless steel fastener. There was no corrective action or preventive action because I have no way of contacting the original manufacturer to offer a suggestion for CA/PA, having thrown the original carton out the first day. The carton clearly said "100% stainless steel" - the equivalent of a certificate of conformance. However, there were no certificates of analysis nor results of a salt spray test nor even a test with distilled water (from steam) which is more damaging than plain tap water in oxidizing plain steel.

If I were to follow the theory of your bosses, I would file suit against my brother-in-law, who was my supplier.

Very well said Wes. The question of responsibility for the nonconforming parts is the supplier who submitted a PPAP which is a statement of conformance to all specifications. Depending on what was communicated to them during the APQP process in conjunction with the terms & conditions specified in the PO, their liability may be limited to only replacing the parts. We don't have enough information here to make a call on this.

As for Wes' replies, I can't understand exactly his position. From his last message, he seems to suggest both sides should be blamed. Why should we get blamed? Is it because we didn't request the plating certificate?

I think the clear-cut positions are one of the following:
1. supplier to blame;
2. customer to blame;
3. both to blame.


I pick #3 - IMHO - It appears that a lack of due diligence on the part of the Customer has contributed to this situation. :2cents:

As I stated earlier in this post the PPAP is a declaration of conformance to all specifications. :soap: Many companies look at the APQP & PPAP process as something that Quality guys have to do before they can ship parts, instead of their opportunity to identify potential issues and work to eliminate them. This is something that needs to be clearly understood by the management team. They have culpability for this because they are supplying the assembled part, along with having accepted the responsibility for the Quality Planning processes that are needed for their supply base when they selected the supplier.