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The supplier representative who will be managing the delivery of product should meet with all of the using parties to get buy-in for the success of the program. The timing of deliveries and where, how to get into the facil­ity, sign-in rosters, badges, etc. need to be determined. The safety of the material is also an important consid­eration. A few organizations have experienced theft by in-house personnel who believe the blame will fall on the supplier for any material shortages.

The type of storage unit, how many, size or sizes of the units, two-bin process, location of the storage units, and who will actually own the units are additional dis­cussion points. Both the customer and the supplier may find it is necessary to maintain an inventory of empty storage units for future items, the deletion of prod­ucts from the program, or a change in the required size of a unit for a product. Who actually owns the units should be determined and documented in the work­ing agreement.

There are many other considerations that must be discussed prior to the implementation of the program. One is the cancellation clause. If the arrangement is not acceptable, how many weeks or months prior to cancel­lation must written notice be received? Even though in most instances the inventory is sold to the customer, what if the customer wishes to return material? These issues should be discussed and methods of handling such returns along with freight charges written into the agreement.

During the course of the arrangement, the supplier may note that products are not being used per original demand information. The question needs to be asked, "How will such inventory items be handled?" The cus­tomer may insist that such items be returned for credit. To prevent any misunderstanding in any area, the con­tracting parties need to agree on how to handle each detail and document every point of agreement.

The accounts payable department will require certain documentation in order to meet payment requirements. This should be reviewed with the supplier and again re­corded in the working agreement.

Other important areas for customer and supplier dis­cussion are the penalty for stockouts, what to report, and the entire reporting process. How often, when, and what? If the supplier hurts himself/herself on the site of the customer, who has liability? If the customer chooses to cancel a product or products from the pro­gram and the supplier is maintaining some buffer stock because of lack of historical information, who is respon­sible for that inventory? These are important questions to discuss during the discussion and evaluation stages of the process before finalizing any agreement between the parries.

The supplier may just restock the storage units, bring­ing the inventory to a maximum level at every delivery, or the supplier may replace an empty bin with a filled bin (two-bin system). Will there be additional charges by the supplier for heavy rush order situations due to lack of good information provided by the customer or lack of good monitoring by the supplier?

These are just a few of the many topics to be discussed in a team environment. The more these issues are ad­dressed and resolved, the more successful and simple the program will be.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 14

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