Hi,
need some advises from you...recently we received wrong cable spool from one of our raw material supplier. Instead of red, 0,5 mm2, zero halogen cable we received red, 0,5 mm2, low-halogen. Phisical difference is only the number of splices, which we normally do not inspect on incoming inspection.
We built these cables to harnesses and got reject materials therefore, which we want to charge to this supplier, but they refuse it, stating that we could recognize it in the incoming inspection...is that right? Is that a base of rejection of the costs occured in our production?

thanks

Is that a base of rejection of the costs occured in our production?I am not an attorney, and last time I checked, I don't think we have a practicing one at the Cove. Unless you have a contractual provision addressing the scenario you describe with your supplier, anything can be used by both parties for blame distribution purposes. As you can imagine, it could be worse. The defective harnesses could have been shipped to your customers. Your incoming inspection process for this specific product and supplier should be enhanced.

Concerning who is going to pay for the material, time, labour, etc. spent, the best you can do is to reach an agreement with your supplier. You can "expect" them to pay for 100% of the costs. Chances are, they might disagree and a long and costly legal battle would ensue. Would it be worth?

If you are paying for red, 0,5 mm2, zero halogen cable and received red, 0,5 mm2, low-halogen then the costs should be your suppliers responsibility. It is their obligation to supply what you ordered. They should not be relying on your incoming inspection to catch their defects.

There are a lot of gray areas where a supplier can contest charges but this shouldn't be one of them, its pretty cut and dry. You ordered one thing, they gave you another.

If you are paying for red, 0,5 mm2, zero halogen cable and received red, 0,5 mm2, low-halogen then the costs should be your suppliers responsibility. It is their obligation to supply what you ordered. They should not be relying on your incoming inspection to catch their defects.

There are a lot of gray areas where a supplier can contest charges but this shouldn't be one of them, its pretty cut and dry. You ordered one thing, they gave you another.

Welcome to the Cove :D

The extent of the supplier's liability is dependent on a number of factors not in evidence here. For example, the supplier might have stipulated that his liability is limited to replacement of the incorrect merchandise. Sidney's advice here is correct, imo. If the supplier denies responsibility beyond replacing the incorrect product, it probably (depending on where this is happening) means that a lawsuit is the only option, and whether that's worthwhile or not depends on the extent of the costs incurred, among other factors.

I don't practice law today, but Contract Law was my primary field.
Most competent lawyers would advise the two companies try to work out a compromise through non-court arbitration. This is simply because a formal court case could take YEARS to wind its way through the courts whereas arbitration is often resolved in WEEKS.

I'm pretty sure the buyer's side of the argument is damaged in regard to being able to lay claim for anything more than the replacement of the wrong material with the correct material because it appears the product was clearly and accurately marked differently from what the buyer ordered (is this true? the phrasing in the OP seemed a little ambiguous to me as to whether the supplier sent material labeled as "zero" when it was "low.") and yet the buyer proceeded to build harnesses with the wrong material. On that factor alone, many juries would side with the supplier, saying that the buyer has a duty to return the wrong material in as undamaged condition as possible, else it is liable to pay for the material not returned.

If the material was mislabeled and buyer innocently used it without having a practical way to tell the difference (except maybe in a functional test when harness was complete), buyer would have a good chance of recovering damages for the labor and all other materials used in the nonconforming harnesses.

It is not clear from the OP's post whether the harnesses with the wrong material were declared non-conforming in-house or at a customer. In either case, the cause is failure to assure proper material before processing AND/OR shipping, clearly the buyer's error.
What was the root cause of the error in shipment? (supplier's issue)
What was the root cause of accepting non-conforming material? (Buyer may not have test lab, but it should have someone compare LABELS to see they match the requirements of the purchase order.)
What was the root cause of building harnesses with the wrong material? (modern QMS systems stress that each step in a manufacturing process be able to assure it has the proper material from the preceding step.)To understand WHY the buyer has a pretty weak case if it should elect to go to a formal court of law, folks can look up "contributory negligence" and "comparative negligence." Start with a WIKI for an overview (http://en.wikipedia.org/wiki/Contributory_negligence) Supplier MAY argue buyer had a duty to assure material was correct. If the material specification was so crucial to the harness (typically, zero halogen is a life/health/safety issue in case of fires since the insulating materials of the cable do not contain halogens -fluorides, chlorides, etc.), the buyer probably should have arranged for periodic independent analysis of the material shipments by a competent third party. (contract machining companies often do this when machining specialty alloys)

This is an interesting thread - I'd sure like to learn the final outcome and all the details when it is settled.

I don't practice law today, but Contract Law was my primary field.
Does this mean that you were a practicing attorney at one time?

Does this mean that you were a practicing attorney at one time?Despite my legal education, I never worked for a law firm, nor ever appeared on behalf of a client in court. I worked as an investment banker and among my other duties oversaw the hiring of in-house and outside counsel to appear for us. I wrote our contracts which I had vetted by attorneys, much the same way document writers have their documents go though an approval process. I had absolutely nothing to do with writing or vetting investment bonds or IPOs on behalf of our clients. They were ALL written by outside Bond Counsel specialists. When it came to decisions regarding our legal options when we contemplated legal action, arbitration, or settlement (as plaintiff or defendant), I was only one vote on the Board.

Although I had much more corporate power when I ran a contract machining company, I did much less legal writing and much more face-to-face contract negotiating (the Contract Review we emphasize in modern Business and quality management systems.) The kind of contracts in the contract machining business were straightforward and ABC simple compared to the involved investment banking contracts.

Since I never intended to be a courtroom attorney, I never renewed the Bar.

What was the root cause of the error in shipment? (supplier's issue)
What was the root cause of accepting non-conforming material? (Buyer may not have test lab, but it should have someone compare LABELS to see they match the requirements of the purchase order.)
What was the root cause of building harnesses with the wrong material? (modern QMS systems stress that each step in a manufacturing process be able to assure it has the proper material from the preceding step.)[/LIST]

Hi, thanks for everyones reply :), basically it is a missidentifying, misslabelling issue from the supplier's side. They remove all the production labels, and put wrong shipping label on it.
So the reel had good label, acc. to the purchase orders. Only visual difference between the good and the bad cables is the number of splices, and this we inspect neither in incoming inspection nor during the production...

What was the root cause of building harnesses with the wrong material? (modern QMS systems stress that each step in a manufacturing process be able to assure it has the proper material from the preceding step.)
Yes, but the burden of properly marking the material for subsequent identification generally falls on the previous operation. If the present operator uses the standard method of identifying the material before further processing, he's off the hook and you need to back up until the source of the issue is found. In this case, it seems that it is a supplier problem, as the OP has now provided more information:

...the reel had good label, acc. to the purchase orders. Only visual difference between the good and the bad cables is the number of splices, and this we inspect neither in incoming inspection nor during the production...
This is one of those "special process" situations--there might no practical way to examine each incoming reel for splices, so some sort of fix needs to be put in further upstream such that mislabeled material can still be outwardly identified. There exists marking apparatus (http://www.spectrumtech.com/)* for situations like this, and fixing this with anything other than inspection on the supplier's end would probably require creating separate identifying markings and part numbers (by the supplier) so that cables used in different final part numbers can be identified. This can get expensive, and once again a decision has to be made as to whether the additional expense is worthwhile.

As for the supplier's potential liability, if the material in question doesn't lend itself to 100% examination, and the supplier knows, or should know, that customers typically rely on his labeling to assure that the correct material has been received, it will probably be easier to make a case against him. But again, it depends on how much expense is involved, and whether or not the trouble of litigation is worth it.


*The link is just an example and not an endorsement.

In the automotive world the supplier is at fault and is expected to burden the costs associated. It's pretty easy to determine who messed up. But as the costs go up it is not uncommon that the supplier threatens to not ship to you.

Note: The fine print of the PO may provide caveats.

Hi,
need some advises from you...recently we received wrong cable spool from one of our raw material supplier. Instead of red, 0,5 mm2, zero halogen cable we received red, 0,5 mm2, low-halogen. Phisical difference is only the number of splices, which we normally do not inspect on incoming inspection.
We built these cables to harnesses and got reject materials therefore, which we want to charge to this supplier, but they refuse it, stating that we could recognize it in the incoming inspection...is that right? Is that a base of rejection of the costs occured in our production?

thanks

There are 2 parts to this question. The first pertains to the legal side of it. You can always put up a claim in the courts. How much compensation you will receive would depend on the operation of the relevant law that exists in your country and the fine prints that exists at the back of most of the documents. From where I am, chances are I'll get replacement of the equivalent amount of correct materials. You'll get better if you have additional documentations that improved your position and that's why for RoHS related materials, most insist that the suppliers give undertakings not to supply the wrong material.

The crucial part is that this incident reveal some weaknesses or inadequacy in your system - your incoming check. I think it's your job to address this part and immediate action is needed.

Just a side opinion - if you have more than one reliable supplier for a certain product, your leverage over the non-conforming supplier becomes greater. Diversify your supplier base and that either motivates a primary supplier to satisfy your requirements or you will already have other approved suppliers as alternatives.

I've often debated the sole source/multiple source issue with colleagues, customers, and suppliers.

For the sake of discussion, "multiple source" means getting identical product from two or more sources with simultaneous orders [even though deliveries may be staggered.]

My basic position has always been
rarely consider multiple sources for commodities (off-the-shelf items sold to multiple customers without any customizing and usually readily available - stuff like paint, fasteners, electrical connectors, etc. )
sometimes consider multiple source for customized products, but maintain strict traceability, down to individual items if possible. The primary criterion is the lead time and startup cost required to get customized product from another supplier if some disaster prevents the original source from performing and delivering product. (For example, I would probably consider buying airline seats from multiple suppliers because I could maintain traceability, putting ONLY seats from one supplier on any single aircraft and the setup cost from each supplier would be relatively low so I could afford to pay for two or more suppliers to gear up and make airline seats. If one supplier has a disaster, I have seats already approved by FAA for my type aircraft and therefore won't have to sell my planes as cargo carriers without seats. Also, the failure or nonconformance of an airline seat would not keep an aircraft on the ground while we get a replacement - we'd just not sell/fill that seat on any flight until a replacement were available.)
usually consider single source for customized products with high startup costs and long lead times combined with complicated manufacturing steps requiring lots of in-process inspection. With single source, it is crucial to build up a "safety stock" of product (preferably off-site of supplier or buyer) with sufficient product to last the length of time it would take to tool up a replacement source for more product. Without safety stock, a minor supplier whose product represents less than 1% of the total components of the buyer's finished assembly could conceivably idle the buyer AND the suppliers of the other 99% with an unplanned shutdown for physical or fiscal reasons.Counterbalancing the cost of carrying increased "safety stock" in inventory is the tremendous saving in soft costs of dealing with multiple suppliers for system audits, on-site or incoming inspection of product, maintaining separate inventories to retain traceabilty PLUS the saving on hard cost of setup and tooling for each duplicate supplier.

Hi Wes,
The supplier did not fulfill your spec !!
Thats the reason for claiming the lot.
Many organization, at least here in Europe, do not perform any incoming inpection because the quality shall be assured at the suppliers site.
This could also be refernced in one of the most important quality principles, customer satisfaction i.e understand your customer needs, stated or not.
You rely on your supplier to ship the right product including labeling/identification.
Ask your supplier how they can assure you how this can not happen again, can you trust their labels?
If you have a good relation you can always ask for compensation due to extra costs for exchange of the cables ...
This is a very serious matter ...

Hi Wes,
The supplier did not fulfill your spec !!
Thats the reason for claiming the lot.
Many organization, at least here in Europe, do not perform any incoming inpection because the quality shall be assured at the suppliers site.
This could also be refernced in one of the most important quality principles, customer satisfaction i.e understand your customer needs, stated or not.
You rely on your supplier to ship the right product including labeling/identification.
Ask your supplier how they can assure you how this can not happen again, can you trust their labels?
If you have a good relation you can always ask for compensation due to extra costs for exchange of the cables ...
This is a very serious matter ...Absolutely true!

However, the implied part of this practice is the buyer shall have previously satisfied himself the supplier's processes to deliver compliant goods were effective, reliable, and consistent even BEFORE ordering the first batch.

So many details are missing from the story.
How many flawless deliveries before the first one?
How was the nonconformance discovered?
What efforts have the various parties put in place to prevent recurrence?(I always like to work out the solution in a "friendly" atmosphere BEFORE resorting to litigation - then, and only then, can the parties proceed to litigation in a sense of fairness instead of shouting and pointing fingers.)

Where was the FMEA (Failure Mode & Effects Analysis) to identify and minimize risks of nonconforming product reaching the next step in the supply chain?
(EVERY link in the supply chain "may" rely on the previous link, but they need a valid rationale (site investigation and analysis?) to justify that reliance.)

It should be noted that an ISO Quality System registration does NOT assure delivery of conforming goods. We have numerous threads and posts here in the Cove of incidents where registered organizations foul up big time.

We always mentioned "customer is King" and "we must satisfy and delight customer"....."customer first!"......."customer driven company"....

If we just have the 1 source supplier and our order is smaller compare to others, I will mention that "supplier is god!".... This is true when you are only a small client to them....(with small quantity in order and specific requirement to them to meet)

I came across in the situation that: there is a quality issue and we want the supplier to solve the problem and meet our specific requirement, the MD "bang" the table and said" tomorrow we will not produce any to you!, we can't meet them"..... unfortunately at that time they are only single source of supplier for us. .......

Sometime we are really want to look into the "relationship" and "clear communication" to the supplier....never never deal with only one of the source for the critical materials.....win win is the best to deal.

The requirement must state very clearly and face to face communication is the best. Using the media such as email, phone, fax......will lead mis interpretating problem...

Feedback is important to supplier and it must be fast and accurate.

IMO, the "quantity" and "profit margin" are the key factors for supplier to be acted more effective to solve the problem and provide good service.......

I ran into a problem where a company was supplying us parts and we found out that they were not conforming to the print when we had assembly problems. The supplier told me they have been making them that way for years. What do you do? This may be a stupid question

I ran into a problem where a company was supplying us parts and we found out that they were not conforming to the print when we had assembly problems. The supplier told me they have been making them that way for years. What do you do? This may be a stupid question

Hmm, standard reply. Making mistakes over years and without being discovered doesn't legitimized it. Just pursue it as provided for in agreements or contract.

We supply products to the automotive industry. I feel we should tell the supplier to start making parts to the print since we are responsible for controlling our suppliers.

We supply products to the automotive industry. I feel we should tell the supplier to start making parts to the print since we are responsible for controlling our suppliers.

Agree. We should be responsible to both our clients and suppliers. In the case you mentioned above, your organization do in a way contribute to the out of control situation today.

We supply products to the automotive industry. I feel we should tell the supplier to start making parts to the print since we are responsible for controlling our suppliers.

Hello DWPOZE,

Absolutely! You should take action immediately. This is a very unhealthy situation. Shipping knowingly nonconforming products to customers constitutes fraud. Period! If you are an automotive supplier...you should have a PPAP process in place. Take a hard look at that too. In particular the PSW. That can become a legal mess when eventually the "DooDoo hits the fan."

Let us know.

Happy New Year!

Stijloor.