Friday, September 17, 2010

Who is Liable When Customer Supplied Materials Fail?

One of VMI’s strong points is our ability to work with the customer on custom designs.

Every once in a while there is a need for ‘customer supplied materials’. The reasons are varied, but usually have to do with material availability, timing, ease of shipping, or economies of scale.

Sometimes material will be shipped to a customer’s facility where they make a modification to it. That same material is then shipped to VMI to be used in the manufacture of products for the same company supplying the material.  At that point, we've come full circle.  The customer is the supplier, is the customer......  

Questions of product liability can get complicated quickly.

One of the big questions is, “What happens when you build a part with customer supplied material, and that part ends up being scrapped?” Related questions include, “How do you handle the loss in material and labor?”, “What if we damaged the material they supplied, and caused the part to fail?”, or, heaven forbid, “What if they supplied us with defective material, and we built parts with it?” Those are just a few questions, off the top of my head!

Determining liability for a failed assembly can be difficult. Just the process of performing a failure analysis requires resources that may or may not be split equitably. The problem may even be indeterminate. Then what!?

Dealing with situations like these requires a good, solid relationship between companies. Accurate and timely communication is a must.

How does your company handle situations like these where your customer is also your supplier?

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