I need to create a procedure to charge back Customers, some of the products are manufactured using customer supplied parts, sometimes we need to rework the supplied parts, but as there is not a formal process in place to charge customers, we are absorbing most of the times that cost. If you have a written procedure please send it to me, or explain what are the steps that you are taking, I appreciate your details.

AC

To simplify our process

1. Product is determined to be defective
2. Supplier is contacted
3. Depending on timeline - we give them the option of them replacing/reworking product or we rework and charge back. They are informed of the chargeback fee at that time ($$/hr). (if we are short on time, we tell them we need to rework and they will be charged back at $$/hr)
4. Rework order is issued (as well as NCR# generated)
5. All labour for rework is recorded.
6. At end of rework, supplier is invoiced for the appropriate amount.

All of this data is also included in the quarterly vendor monitoring report (the bad and good list :))

John

I will share this with you I can not send our procedure.

We charge 250.00 for Admin. and 35.00 for sorting if we get a temp.
If we hire a third party then its what ever they charge is what is charged
back to the suuplier.

You can look at this prsentation and get the Idea's from the forms.

Build you procedure off of this and your supplier manual.

I need to create a procedure to charge back Customers, some of the products are manufactured using customer supplied parts, sometimes we need to rework the supplied parts, but as there is not a formal process in place to charge customers, we are absorbing most of the times that cost. If you have a written procedure please send it to me, or explain what are the steps that you are taking, I appreciate your details.

AC
Let me ask a few questions (so I can give you a focused answer):

Does customer SELL you the parts or supply them for free?
Is the part unique (only available from the customer)?
Does the customer make these parts or buy them from another source?
When do you detect the problem with the customer-supplied parts? At receiving inspection? On the production line?
What is the relative value of the customer-supplied part to other parts you supply to the finished product? To the total value you sell it for?From experience on BOTH sides of this equation (receiving parts from customers and supplying parts to assemblers), I can tell you that any supplier who started unilaterally charging me for bad parts or repairs WITHOUT discussing the situation with me first for a root cause analysis of HOW bad parts were reaching him would soon be an ex-supplier.

As a supplier, if we received nonconformng material from a customer, we treated it exactly as we would with any other supplier:

We called customer and notified it we had determined parts were nonconforming and we were unable to proceed with production until the situation was resolved.
We provided nonconforming samples and copies of our inspection results for each sample (noting inspector and inspection instrument for each characteristic or attribute.)
If customer concurred with our results, we DISCUSSED how to proceed (scrap, return for replacement, rework, use as is, etc.) and how we would adjust financial consideration for our costs in dealing with the situation.
If customer did NOT concur with our results or we couldn't agree on compensation, we sought a third party arbiter agreeable to both sides.
If we still couldn't agree, we canceled the contract and, if necessary, pursued litigation for compensation.
In point of fact, we never reached actual litigation, but we did have to threaten litigation with two different customers before we reached an agreeable settlement. When we were the customer, we usually resolved the issue within 24 hours, with everyone remaining happy campers. The main thing we tried to do in every situation was avoid pointing fingers of blame and concentrate on fixing the issue.

I want to stress this situation is NOT something dealt with at a low or middle level but should involve top level executives IF the original contract was silent on what to do if the situation should arise. This kind of situation is why Quality Professionals put so much importance on "Contract Review" and try to imagine and cover all the possible "what if" situations that might arise.

Anerol

Here is a blank form you might want to look at and adopt with your criteria.

I appreciate all your responses, Thank you very much.:thanks:

Wes,
Please see my responses,

Does customer SELL you the parts or supply them for free? They supply the parts for free.
Is the part unique (only available from the customer)?
Yes, it is.
Does the customer make these parts or buy them from another source?
They buy them from another source.
When do you detect the problem with the customer-supplied parts? At receiving inspection? On the production line? Receiving inspection.
What is the relative value of the customer-supplied part to other parts you supply to the finished product? To the total value you sell it for?
I would say 60%. These are steel parts and are the main component of the final structure.

Do you think that I can create a form with cost of poor quality involved, send to customer for acknowledgement and ask for a PO# and when finish the job send the invoice to customer for payment?

AC

I appreciate all your responses, Thank you very much.:thanks:

Wes,
Please see my responses,
Does customer SELL you the parts or supply them for free? They supply the parts for free.
Is the part unique (only available from the customer)?
Yes, it is.
Does the customer make these parts or buy them from another source?
They buy them from another source.
When do you detect the problem with the customer-supplied parts? At receiving inspection? On the production line? Receiving inspection.
What is the relative value of the customer-supplied part to other parts you supply to the finished product? To the total value you sell it for?
I would say 60%. These are steel parts and are the main component of the final structure.

Do you think that I can create a form with cost of poor quality involved, send to customer for acknowledgement and ask for a PO# and when finish the job send the invoice to customer for payment?

ACIf I were in your position, I would do the following immediately:

call (phone, not email) the customer and tell him the folks supplying the part to him for you are providing nonconforming material.
ASK (not volunteer to do anything) what he would like you to do with the nonconforming parts
Depending on his possible answers (listed below) tell him what you would charge for that service and ask if he's willing to pay.
If he's willing to pay/negotiate, then you can ask him how he would like to handle the accounting.Possible choices for customer to have you perform for a price:

reject entire shipment if ANY nonconforming material is detected in receiving inspection - customer determines where to ship material at his expense
accept shipment if nonconforming material is detected and sort and segregate nonconforming pieces during production as they are detected for customer to claim credit from original producer.
rework or repair nonconforming material to make conforming if possible, non-repairable material handled as #2 aboveBe sure to offer samples and inspection sheets to customer to verify material is nonconforming. Under no circumstances should you offer to deal with original supplier - that is strictly for customer to handle.

If customer refuses to pay or negotiate pay, then simply reject shipments found to contain nonconforming material. Explain to customer that if he does not make arrangements for dealing with rejected material, you will SCRAP entire shipment and keep any scrap fee as liquidated damages since you cannot afford to store unusable material without payment.

Unasked and maybe overlooked:
What happens if YOU spoil material while working on it?

Overall, I think it is a business problem and a business problem needs a business solution. I strongly endorse Wes's recommendations.

If you are in a position to do so, immediately pick up the phone and do as Wes advised. After all, you still need to know how/what the customer will do in order for you to have a meaningful procedure (disposition).

I need to create a procedure to charge back Customers, some of the products are manufactured using customer supplied parts, sometimes we need to rework the supplied parts, but as there is not a formal process in place to charge customers, we are absorbing most of the times that cost. If you have a written procedure please send it to me, or explain what are the steps that you are taking, I appreciate your details.

AC

Just wondering can your incoming inspection not reject the faulty customer supplied parts :confused:

Why use them, waste your processing time and end up charging the customer ?

Am I missing something :rolleyes: