Dive Into a New Product Category
Another necessary part of the process of building good vendor relationships: on-site visits. “These are essential to review supplier policies, systems and processes; to discuss compliance requirements with a supplier’s operating staff; and to periodically review supplier-compliance audits,” says Guschke.
Many issues can be resolved with these site visits/tours when the operations staffers on both sides start talking, Cooper says. “Having vendors see your operations will help them understand the impact of not following the guidelines, and they’ll realize your rules aren’t arbitrary or inconsequential.”
And on the flip side, site visits to your vendors are especially helpful when vendors can’t comply with your rules. “Usually an alternative solution or compromise can be reached when the operations rep sees what options are available,” says Cooper. “These face-to-face interactions, even if they’re just hospitality tours, are helpful to strengthen relationships.”
When Rules Are Broken
What should happen when a vendor breaks the rules or fails to follow stated policy? Guschke recommends a stepped process. “First, send a written notice of non-compliance, then a notice of a chargeback. After x number of chargebacks, initiate a decertification process, ending with executive conversation and negotiation of compliance.”
But Cooper argues it’s the chargeback that’s the industry norm and usually will get more attention (read: better response) than other types of penalties.
Mollo says the industry-standard penalty levied against a vendor in cases where a minimal level of defects or poor quality is detected is 2 to 3 percent. Note: This applies to scenarios in which, after inspection, you find that just a few items in the product grouping are defective, but the lot as a whole still is acceptable.
But if the defects are what you’d call “unacceptable” — that is, there are too many damaged or poor quality products that can’t be repaired — then the items usually are returned to the vendor for a negotiated chargeback credit, Mollo explains.