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What happens when out of specification raw materials impact production and/or service levels?

  • Are your supplier quality monitoring processes robust enough to ensure these issues are dealt with and do not reoccur?
  • Do you have a well implemented process for cost recovery from suppliers who deliver out of specification raw materials?
  • Are there repeat offender suppliers who continuously send out of specification raw materials.
  • If you are a multi site business are you able to spot patterns at group level that may not be evident at site level?

As teased a few weeks ago we are delighted to announce the release of exciting new functionality which combines  the capabilities of our workflow manager with the functionalities of our goods in module to create a transformational capability to automatically manage financial recovery processes following the delivery by a supplier of non-conforming product which impacts a food and drink business.

For example, if a supplier delivers out of specification raw materials there can often be substantial consequences on the receiving site. Examples include:

  • Costs to sort or rework product.
  • Overtime
  • Increased product cost from substitution with more expensive alternative raw materials.
  • Reduction in finished product quality.
  • Shorted orders and charges from customers.
  • Extra labour costs for additional production runs to make up shorts.

This is not an exhaustive list.

What can rub salt on the wound in these situations is that it can often be repeat offender suppliers who are the source of these ongoing issues.

Existing QADEX functionality handles the QA checks on intake and non-conformance process. Fully in line with BRC8 best practice for supplier quality monitoring.

But what about the long and time consuming process of recovering the above costs from suppliers. Typical steps could include;

  • Sorting of raw material to quantify how much can be used and what needs to be rejected.
  • Quantification of value of raw material affected.
  • Quantification of labour costs incurred.
  • Quantification of all other costs incurred relating to shorting customer orders.
  • Agreeing the total cost with the  supplier and negotiating a settlement value.
  • Raising of invoices or debit/credit notes.
  • Collection of sums outstanding.

Typically this process, or your own version, can take months to reach a conclusion or worse will not be concluded meaning that costs are not recovered.

This new functionality can fully automate this process by creating separate workflows for the technical non-conformance and commercial recovery.

Our best practice recommendation is to not charge suppliers initially but to explain to suppliers that if issues recur there will be charges. This gives responsive suppliers the opportunity to address the original problem in a fair and reasonable way.

“What you do not want done to yourself, do not do to others.”

Confucius

Conversely suppliers who are not responsive in resolving problems with non-conforming products often wake up and take notice when they are charged in full for the reasonably costed impact of their non-conforming product.

To find out how to transform supplier quality monitoring and deliver step change improvement in product safety and quality give us a call.

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