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Effects Of Poor Agreement

By Zach Arnold | April 9, 2021

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It is not surprising that the supplier is generally the main suspect in cases of poor performance. After all, they are the ones who provide the necessary products and services, so they have to be, right? While this is generally the case, automatic blame on the supplier is a flashy thought that can lead to embarrassment and apology when it becomes clear that the organization itself is responsible for or contributed to one aspect of the supplier`s poor performance. An effective contractual relationship includes a reporting system that informs both parties of the contract`s activities. Without these reports, both parties will not have the opportunity to control the benefits of the agreement and to develop amendments that will have to be made when the agreement is renewed. Effective reporting also tracks quantities that help each party monitor its use and determine when contractual limits have been met. A good relationship provides a solid basis for successfully dealing with cases of poor supplier performance. Neither side benefits from a broken relationship. There are two possible explanations. First, it is simply that, because the decision and its effects are generally not fully understood or reported, it falls under the radar of these financial controls. Second, well-known cognitive psychology is loss aversion – we tend to strongly avoid accumulating equivalent losses.

Or, in this case, we make sure that there are controls when payment (loss of money), but not in the decision to sponsor by commercial levers (profits), while the values and the impact on the overall programming of the cost of the contract can be exactly the same. The organization`s contributions to poor supplier performance can be: two reasons for not using their commercial levers are often cited: potential damage to the supplier relationship and a delay in the project plan. But rarely, if we are used correctly, we see evidence that decisions to use these commercial levers harm the relationship or disrupt the schedule. Where this has happened is only in cases where a bad relationship already exists. On the other hand, contract managers generally do not seem to feel that the relationship is damaged when the supplier uses its own commercial levers, for example. B by requesting a sector variant for high costs. So why the hesitations on the side of the organization? The success of repairing the wrong treatable suppliers is not guaranteed. The supplier must not take immediate or even delayed action, its reasons for solution may be suspicious or irrelevant, or the approach used has not provided.

All of these negative effects are unlikely to occur as a result of a single instance of poor supplier performance. The magnitude and extent of negative effects depend on the nature of poor performance and its exact causes and how poor performance is detected early. As a specific measure, poor performance is often expressed as achieving a level of performance below the desired minimum value, with the severity of the deficit increasing relative to the difference between the actual level and the desired level of performance. Supplier risk analysis in the early stages of your relationship can also be an important indicator of the likelihood of poor performance. The obvious result of poor purchasing practices is the loss of money. Poor procurement strategies mean that you make redundant purchases, pay too much for transportation, suffer from a lack of quality control, or develop problems with the scope of the contract. In other words, you could end up with safety barriers that don`t hold dinosaurs properly, tracking devices that don`t follow dinosaurs, and emergency shelters that don`t protect park hosts. All of this leads to the kind of financial losses that a company can sink.

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