Surfacing Supplier Exceptions

This article is one in a series about customer-supplier principles for industrial and commercial purchasing relationships.  

© 2000 Corporate Training Partners, Inc. 

Customer-Supplier Principle  #2.

The time to put forward exceptions is during the bidding process, not after the product delivery.

A good supplier bases price and lead time on meeting all known bid requirements. Before and during quotation of price and lead time, these suppliers spell out any requirements that cost extra, take extra time, don't make sense, or can't be done.

• Example: Purchase order 123 requires a special paint and a special material. The supplier states in writing that he or she does not know how to make or check these items, and the price and lead time do not include these items. Because the exception is clear and timely, the customer works out this issue with the supplier before harm is done.

• Situation to avoid: The product arrives with bad paint and the incorrect material; the supplier then states that it will take six months and 75% extra money to provide these items. The supplier says, "Nobody here had any idea how to do these things, so we just disregarded them. We were already doing you a favor and losing money on this job, so you will have to pay extra, or forget the job and tell us where you want us the send the tooling!"

• Question to ask: "Are you sure you have read and understood ALL the bid requirements, and there are no extra costs and lead times required to meet the requirements?"

The reverse side of this coin is that the good supplier expects to re-quote if the customer makes changes after the original bid.  

Many suppliers, such as home-builders and military contractors, count on changes as a major opportunity to make a profit!  

Re-quoting customer-desired changes partway through a project puts the seller at a tremendous bargaining advantage, since changing suppliers in mid-project will be very difficult and expensive for the customer. 

In any case, the expectation of re-bidding if the requirements are changed, illustrates that the original bid intended to reflect the exact original requirements.

In most western cultures, the norm is that a deal, once negotiated, must be fulfilled.  This is recognized in contract law.  However, this doesn't prevent certain suppliers from trying to loosen requirements at no price reduction after a deal is underway.

The customer's best advantage comes from careful planning, holding the supplier to the agreed-upon price and performance, and avoiding changes once underway.