Cost of Supplier Non-conformances

Re: Cost of Non-conformance

Hold your suppliers accountable to the contract. Send failures back.
Alternatively, you can have purchasing negotiate into the contract - if they havent' already - that any and all subsequent work done by your organization to 'recover' failed material (including engineering assessment, rework/repair/retest and all associated 'paperwork') will be billed back to the supplier.

If you don't hold them accountabel in some fashion they will simply continue to send you nonconforming material and cost your company money.

Re: Cost of Non-conformance

Thanks Bev! I’ve been trying to convince purchasing its a cost we should be getting compensated for. So often it’s a unplanned distraction to our engineers that just gets swept under the rug.

Krink,

What worked for me was to start tracking the time we weren't being compensated for when we should have been.

It took about 2 months before the edict came from the corner office that all contracts be re-negotiated to consider additional costs that we were bearing (well, it was the past tense after that).

At the end of the 1st year, we recovered over $250,000. The vendors figured out we were serious after that. Within 2 years, we were under $50,000 in recovered costs PLUS we were MUCH more efficient since we had less "distractions" related to non-conforming material.

You guys are awsome. Thanks for the testimonial.

Krink said:

Most of the Non-conforming product we receive from vendors must be reviewed by our engineering dept for disposition because of the complexity. How do we recoup this cost. In a sense, I inspect my vendors parts as part of my quality screening but when I find a non-conforming product I am tempted to hand it back to the vendor and say try again at your cost. Instead I have one of our engineers review it to see if we can save it, at my cost. Any ideas?

Click to expand...

As Bev has suggested, it is not only the cost of product but also the cost of incoming inspection to be levied upon the supplier. My company charges them for cost of Incoming inspection, transportation cost (for sending back, if not scrapped), and cost of rework (minus 25% flat) if deviation is permitted. The supplier agrees without fretting, unless he has monopoly.

Many times it happens that the purchase dept. try to rescue the supplier, for one reason that they are working hand-in-glove with the supplier, or they have a genuine reason of non availability of a substitute supplier.

Umang