Conflicting ppm rates - Customer requires 0 ppm - Suppliers work to 50 ppm

Hi all, I was hoping you could help?

My customer requires 0ppm, however all my suppliers work to 50ppm. We are an automotive distributor, and I constantly find myself stuck between a rock and a hard place.

The customer for example will discover 1, 2 or 3 defect components and issue NCR and start sorting of any assemblies they have produced.

The supplier will not pay for any sorting costs, because they work to 50ppm.

This leaves me the distributor typically with the bill for sorting.

Can anybody suggest any corrective action for this common occurrence.


Thanks

Andy

Hi Andy,

I understand from one of your earlier post that your organization is certified to ISO 9001.

Now, what happened to your 'Contract Review' process? You are supposed to review your capability and indirectly the capability of your suppliers and contractors (if any) before accepting the order. If it is due to your failure, you are fully responsible for the consequences.

If it is a result of fresh requirements from the client, you need to negotiate.

Hi Andy,

Your case looks like business decision to be taken. If you agree supplier with 50 ppm then get the same agreement from customer. Or else you have to impose same zero ppm on supplier.
Present situation, if you dont do any processing..which can filter the 50ppm from supplier, then you have to review agreement.

Wishes, Ram Vaidhya

Does you customer or supplier use sampling plans ?

Harry is right about contract review process. You might want to do a detailed internal audit of this process, so this situation does not happen again. (I have seen eager sales people accept almost any condition from the customer to get the business)

On a practical note, you will have to decide:

- get your supplier to 0ppm (which might increase the cost of your purchased )

- sort the suppliers product at your cost

- live with the "sorting cost"

- find another supplier

Your customer will not accept a 50ppm level after you have accepted their 0ppm.

In the end it is a business decision. If you start losing money on the deal, you might have to cancel the contract with your customer.

I agree with the others. Look at your commercial model. Either up your price to supply automotive grade or push back on your suppliers. If they are genuinly automotive products, they should have embraced the 0 defect mentality. If they are commercial products but you are selling them to automotive, then it's your issue.

It may not be worth you while to support this business. Cost of servicing an account needs to be factored in. Either up your price or deselect the product line.

In order to get your supplier to work to 0 ppm, it has to be a part of your purchase order requirements. You can not just "tell them" it is your requirement. Expect them to adjust their pricing as a part of their "contract review", though.

If your customer is requiring you to maintain 0 PPM than your suppliers should. As some people have said: Flow down the requirement to the Supplier in your Purchase Order.

Coury Ferguson said:

If your customer is requiring you to maintain 0 PPM than your suppliers should. As some people have said: Flow down the requirement to the Supplier in your Purchase Order.

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Flowing down unreasonable requirements isn't likely to have the desired results. I don't even know what "0 PPM" means in terms of customer requirements. What happens if the PPM level is 10? I have an idea what happens: the customer's CA system is invoked and the cost of processing needless documentation likely exceeds the cost of the defect.

As far as the OP is concerned, he's going to have to push the extra costs back to his supplier somehow (good luck with that) or eat them, and hope they don't wind up eating him.

Jim Wynne said:

Flowing down unreasonable requirements isn't likely to have the desired results. I don't even know what "0 PPM" means in terms of customer requirements. What happens if the PPM level is 10? I have an idea what happens: the customer's CA system is invoked and the cost of processing needless documentation likely exceeds the cost of the defect.

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I don't disagree with you here, but why should anyone accept product that does not meet their needs (which is kinda like 0 PPM)? I don't allow Suppliers to provide nonconforming material/product; and if it is found, the product is returned and a corrective action maybe requested.