How to deal with a non-responsive supplier

Question

The small technical company I work at has multiple suppliers that deliver materials, parts or whole sub-systems of our product. As we are a new company the product is still developing, resulting in small changes to the specification and new findings fairly often.

One critical supplier of a sub-system (an electronic device) is becoming harder to deal with every day and has currently stopped delivering, does not respond or read e-mails and is barely available by phone. When he speaks on the phone, he just rants.
Without this sub-system we cannot deliver our product and no alternative supplier is available as the device is custom built for us. I am one of the team members that is tasked with dealing with this supplier.

What steps can I take to make sure the supplier delivers on a short term (< 1 month)?

Background information
The supplier was closely involved in the early development of our product and used to deliver normally. After using his product in a test environment, flaws surfaced. Not all specifications were respected. This started an iterative process, mainly concerned with the tweaking of the software of the device. Unfortunately the supplier seems incapable of tweaking the software. He does not use version control, resulting in a "random" version every time we get a test device.

The contract with the supplier states that our company will order an X amount of electronic devices. It also states that our company has the right to receive the source code. If the source code would be provided now, we could help the supplier and together deliver a product. However, the supplier will only provide the code after we order the agreed amount. Therefore we have started ordering subsets of the agreed amount. Unfortunately the supplier is unable to deliver the subsets due to the flaw in his software. He never mentions a target delivery date, and even if he does, he simply does not care and misses the "deadline".

Answer 1

Unfortunately, this problem sometimes occurs in procurement regardless of what is written in the contract.

Second sourcing can be a good thing, but it takes significant resources and time to set that up from the buyer's side especially if we're talking about an engineered item. Moreover, if your volumes aren't "large enough" you may not be able to convince two vendors to split the volume.

Three things come to mind here:

• You say the vendor is "ranting". Perhaps don't see it as a mere rant but as a way to get leverage. If you can substantively address the things he is ranting about you may be able to trade that for more cooperation in shipping the item.

• It sounds like the vendor is trying to hit a moving target (eg "...changes to the specification and new findings fairly often..."). To a large extent that's a problem on your side. Once you go to manufacturing things like that are serious matters and should require change orders (ECO's). These, of course, precipitate charges. If the vendor is expected to accommodate without a formal process and revenue, that could lead to lack of cooperation. In some situations, the buyer should furnish hardware and software for "functional test" so that vendors have a concrete way to determine whether something is passing or failing. I don't know if that applies in the situation here, but it is common.

• As @Kilisi said, management might need to get involved here if this becomes a contract renegotiation. Even so, the two items are above are almost certainly the first things that need to be addressed.

Answer 2

There isn't much you can do apart from conventional means like email and phone. But unless you're project manager or overall in charge of supplies you should escalate the issue to your superiors to deal with the supplier.

It appears you are a team member rather than top management, this sort of problem should be fixed at a higher level by the people who can actually make decisions, authorise payments, negotiate from a stronger position with suppliers etc,. There's a big difference between ranting at a team member and fronting top management who can cut your revenue source or send a lawyer to see you.

There should have been, and may be a contract to supply or something similar. If you guys are building a product with no assurance of getting the requisite parts then someone needs to do it properly.

Answer 3

You seem to be in a situation where, unfortunately, you are simply at their mercy. If there are no contractual clauses you could enforce (which from your description, there don't seem to be) and they are truly the only supplier with the means to deliver what you need, there is very little you can do. And it seems they know it.

This supplier seems, at best, unreliable. Therefore, rather then trying to get him (it seems to be a single person?) to do what you want - try to find or create an alternate supplier. Do not make the same mistakes you have this time, and put down terms regarding access, deliverables and schedule.

I wish you the best of luck.

Answer 4

What steps can I take to make sure the supplier delivers on a short term (< 1 month)?

Offer money.

You have little to no leverage here. But you can offer money if they meet short term milestones and threaten to remove them as a supplier if they don't.

Sometimes dangling a bonus can get a non-responsive supplier's attention. Sometimes not.

And use this as a learning opportunity. Betting your company/project/product on a single supplier is bad business. Fix that ASAP.