Escape = Chargeback?

[[email protected]]

I received a letter today from a major aerospace customer. The main theme was "doing it right the first time, with regard to "escapes".

It seems the penalties for escape are:

1. Escape to customers facility is $1000.00 every ten paperwork escapes.
2. $1000.00 for every part escapes.
3. Escape to the customers customer = $2000.00
4. Travel expense incured as a result of a required visit, due to escape.

We are considered second tier or sub in this case.

Can anyone relate some first hand experience regarding this topic?
What type of paperwork escapes? What would happen if our part in
the mfg. process was in error? What if we identified a deviation, submitted
the deviation to our customer and they still allowed an escape.

I have searched for a similar thread but found none.
Thanks

 

[Wes Bucey]

The term "escape" is new for me (I'd like to see the exact language with the identity of the customer deleted), but the concept of penalizing a supplier for errors is definitely an old one.

Many folks here can give anecdotes of being caught in the crusher of an incompetent customer who will blame its own mistakes on its suppliers and penalize the suppliers.

There are only two possible avenues to follow if the supplier decides it can't "fire" the customer:

1. roll over and take the abuse
2. get together a competent cross-functional team (including lawyers) and go over the contract terms with a fine tooth comb and eliminate as much possibility for the customer to make unilateral decisions about "fault" and "blame" as possible. Demand absolute proof that nonconformity is, in fact, a nonconformity. Insert clauses calling for independent mediation if customer invokes "escape."

Refuse to be a patsy for a lazy purchasing department that does not expend sufficient effort in qualifying a supplier. Absolutely beware of any customer who approaches the supply chain with such an adversarial attitude. Modern theories of supply chains call for partnerships, not slave/master relationships. This letter says on its face that suppliers will be considered guilty if anything goes wrong

 

[Craig H.]

[*]get together a competent cross-functional team (including lawyers) and go over the contract terms with a fine tooth comb and eliminate as much possibility for the customer to make unilateral decisions about "fault" and "blame" as possible. Demand absolute proof that nonconformity is, in fact, a nonconformity. Insert clauses calling for independent mediation if customer invokes "escape."

Refuse to be a patsy for a lazy purchasing department that does not expend sufficient effort in qualifying a supplier. Absolutely beware of any customer who approaches the supply chain with such an adversarial attitude. Modern theories of supply chains call for partnerships, not slave/master relationships. This letter says on its face that suppliers will be considered guilty if anything goes wrong

This is SERIOUS. All too often chargeback (escape) systems are used by customers as an ESCAPE from THEIR responsibility to communicate effectively. Take Wes's excellent advice to heart. This is a situation that can begin to smell very badly with amazing speed.

Do a search on Chargeback. One of the results, which happens to contain what I consider one of my finest all-time rants, is:

SCAR (Supplier Corrective Action request) Charge Back

Good luck, and if you have more questions, ask.

 

[[email protected]]

Escape = verbatim

Fictitious company name = Company A

Company A is committed to exceeding customer expectations and ensuring flight safety through perfect quality. As a value chain, quality standards must be intergrated into our daily operating systems so that "doing it right the first time" is the noem, not the exception. You are instrumental in acieving that goal.

Pursuant to that objective, a new charge back policy for supplier escapes will go into effect all Company A purchase orders issued on or after Nov 1,2005 (other than purchase orders issued pursuant to existing contract or agreements between Company A and a supplier that contain any provision with respect to charge backs for supplier escapes). If Company A identifies you as a candidate for a charge back, you will receive a debit memorandum with instructions on submitting payment. If the charge back is not paid to Company A, your next payment for services rendered to Company A will be reduced by the charge back amount in arrears.
End of verbatim.

Below are the rules for charge back, in effect on Nov 1, 2005.
1. Escape to customers facility is $1000.00 every ten paperwork escapes.
2. $1000.00 for every part escapes.
3. Escape to the customers customer = $2000.00
4. Travel expense incured as a result of a required visit, due to escape.

In conclusion, they state; Verbatim,
This new policy does not preclude Company A from collecting and recovering from the responsible supplier any additional / actual costs or damages incurred or sustained by company A as a result of a supplier escape.

Bob H

 

[BadgerMan]

Ah yes, this is becoming more and more common although I am not aware of any situation where a customer has been successful applying it. We generally take exception to the clause in a contract. “Escapes” is the new buzzword for accidental shipping of latent or undetected nonconformances. I have also heard it referred to as “leaking”. I have not heard of penalties for “paperwork escapes” but I assume this to mean errors on shipping documents or included certifications. If you had an approved deviation for the condition and they still hit you with an escape charge, I would take the issue up with your SQA contact. You also would want to seek reversal to avoid it impacting your supplier rating.

 

[Marc]

I must be missing something. To me, an escape (I first heard it used in the late 1980's) in manufacturing was nonconforming product reaching a customer. Or worse, nonconforming product reaching THEIR customer.

Can we better define what 'escape' is in this thread?

EDIT ADD: BadgerMan beat me to it...

 

[Wes Bucey]

Fictitious company name = Company A

Company A is committed to exceeding customer expectations and ensuring flight safety through perfect quality. As a value chain, quality standards must be intergrated into our daily operating systems so that "doing it right the first time" is the noem, not the exception. You are instrumental in acieving that goal.

Pursuant to that objective, a new charge back policy for supplier escapes will go into effect all Company A purchase orders issued on or after Nov 1,2005 (other than purchase orders issued pursuant to existing contract or agreements between Company A and a supplier that contain any provision with respect to charge backs for supplier escapes). If Company A identifies you as a candidate for a charge back, you will receive a debit memorandum with instructions on submitting payment. If the charge back is not paid to Company A, your next payment for services rendered to Company A will be reduced by the charge back amount in arrears.
End of verbatim.

Below are the rules for charge back, in effect on Nov 1, 2005.
1. Escape to customers facility is $1000.00 every ten paperwork escapes.
2. $1000.00 for every part escapes.
3. Escape to the customers customer = $2000.00
4. Travel expense incured as a result of a required visit, due to escape.

In conclusion, they state; Verbatim,
This new policy does not preclude Company A from collecting and recovering from the responsible supplier any additional / actual costs or damages incurred or sustained by company A as a result of a supplier escape.

Bob H

Yep! This is what I expected. Make a copy of this thread and give it to your boss (and the top boss of your company.) This kind of unilateral oppression has been the downfall of many fine organizations who tried to do the right thing by "going along to get along" and subsequently ended up being betrayed and abandoned by the customer.

Here's the drill from a guy who has been a suit in the executive suite for a long time: Everything is negotiable. Henry Ford (the first one) was quoted as saying,
"If you think you can do a thing or think you can't do a thing, you're right."

This definitely applies to contract negotiation. Don't hesitate to pay for a top notch contract specialist attorney to help work this out. Remember the adage my mom always uses, "Penny wise and pound foolish." The first time you get caught paying for an "escape" could have paid the entire legal bill and after using the attorney, you won't have the stress of worrying the customer will invoke the escape unfairly.

Push comes to shove, have a boss contact me and I'll help him understand the benefits of PREVENTIVE action versus CORRECTIVE action.

 

[Marc]

[email protected] said he received a letter which in essence contains a new requirement. Technically I would consider that a contract change and would not agree to it.

 

[BadgerMan]

"If you think you can do a thing or think you can't do a thing, you're right."

Great quote!

 

[db]

In the automotive industry, chargebacks are nothing new. I had a client that got a chargeback for a new engine. One of their caps got sucked up by the oil pump and destroyed the engine. The problem, their caps cover the fuel rail, to keep contaminates out prior to installation. Nothing they sell should ever be on the inside of an engine. They were not allowed to see the engine, nor look at any data pertaining to the damage. The customer did not care how the cap got from a fuel rail, to the oil pan. Even though the only way it could have got there was on the assembly line, it was the cleint's part, so the client had to pay. BTW, what the customer did was short pay the next invoice the amount of the chargeback.