Why Penalizing Your Suppliers Is Not A Great Idea

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Poor Quality & Missed Deadlines.

Is it Wise to Penalize Your Supplier?

Our services at Guided Imports offers a Production Manual, instead of a purchase contract. We do this because of the average size of our importers. Most of the importers we work with on a daily basis are small to medium size businesses without major purchasing power or serious influence – we’re not talking about Wal-Mart or Tesco.

A question we are often asked when putting together a Production Manual is, what kind of penalties we can add to a production, in the event the quality turns out to Be less than what was agreed upon?

In our opinion, penalties are not an ideal addition to negotiate into a deal.

For first time, or single run production factories, penalties sound so incredibly harsh to the supplier, that there is a good chance they will simply walk away from the deal entirely, just for bringing it up.

In order for an importer to convince a supplier to accept penalties into the agreement for poor quality, the supplier would need to be a regular supplier. But this in itself does not allow for constructive improvement. In fact, quite the opposite, this punishment instills a childish fear that is counterproductive to the ultimate goal – a well produced product.

If a regular supplier is producing quality that was not what was first agreed upon, it should be the importers duty to constructively critique the quality and call for corrective actions to be done.
Instead of thinking about penalties for subpar products, it can be more constructive to clearly explain to suppliers what changes need to be made for future productions, and ensure their is clear understanding and an agreed upon solution.

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