Q & A Table of Contents
CONTRACT PERFORMANCE PROBLEMS
From: Dallas, TX
Question: I'm a Logistics manager and have to fly to a supplier in Atlanta next week for material delivery problems. The issue that I have is that my factory in Manila has had to stop productions because of material shortages. My company wants me to negotiate a per day down time payment of $6500 or go to court. What would be my best plan in this situation?
Response: There are several questions you need to be able to answer:
1. Does the Atlanta factory have a contract which includes a penalty clause for non-delivery or late delivery?
2. Do you have alternative source(s) to keep the Manila factory in production -- or to reduce the time they are shut down? In other words, what is your fallback position?
3. Did the Atlanta supplier give you any warning, or is their failure to supply the goods bad faith? Do they have a problem of supply/raw materials, labor, financing? If it is any of those issues, can you or your company step in to bring them back to productivity on a short- or long-term basis?
4. How significant from a business or personal standpoint is the relationship between you/your company and the folks in Atlanta? If these are folks with whom the long-term relationship is important, you should treat the negotiation as an episode within that long-term relationship. If it is your intention to drop them like a hot potato once this issue is resolved, that could influence the approach you take in the negotiation.
5. Rather than penalize them for non-performance, what incentives can you offer them for success?
6. When you meet with them, the most important thing to do is ask questions and listen carefully. If you say, "There are two possibilities, I've got all the answers." you risk getting nowhere. If they contribute to the solution, they're more likely to feel committed to the delivery of whatever they promise.
7. While the $6500/day downtime may be a defensible figure, you should measure it not only against how much it is costing your company as regards the Manila downtime, but also against the cost of going to court. You/your company has done the homework on how much each day costs (the $6500). Have you also done the homework on how much it could cost if you go to court? Will going to court speed up your Atlanta supplier's productivity of the materials you need? One of the scariest things about going to court is there are no guarantees the "good guys" will win. How much will your lawyer cost? Can you collect your lawyer's fees and court costs from the Atlantans if you win?
Don't forget , you can fight fires without burning bridges, Steve.
| 
