An attorney once told me that you don’t really need a contract unless you plan to sue someone. That doesn’t sound like the basis for a good relationship to me.
In my prior life as VP, Operations for a rapidly growing manufacturer, we had an active supplier partner program with between 150 and 200 suppliers. We had a contract with only one supplier, and that was because their bank required it to help back up their line of credit. For the rest of our suppliers, we had terms and conditions on the purchase order as well as what we called a purchase accord.
Setting Expectations
The purchase accord was simply an agreement between the two of us (I suppose you could call it a contract) that spelled out our mutual expectations. We told the supplier that we would provide them with forecasts and purchase orders and how much of the forecast we would commit to. The supplier told us that they would ship to us in the quantities we requested with a specified lead-time. We also agreed on payment terms and quality and conformance standards. The document was typically two pages long.
Partnership-Oriented
When we first started talking to a new supplier and presented the purchase accord idea, their reactions were a combination of surprise and delight. Taking this approach was unusual for the suppliers and many often said they wished their other customers were as partnership-oriented as we were
Partnerships start with a foundation of trust and communication. Accountability for performance certainly needs to be maintained, but with close communication, issues can typically be resolved long before any legal action would need to take place. Starting on the right foot goes a long way in that direction. No fuss, No muss.
© 2013 – Rick Pay – All Rights Reserved
