While the first three posts in this series focused on specifications as the main source of misunderstanding between buyers and suppliers, there certainly are more areas of potential friction. Fortunately, there is one skill that can help you avoid such friction.
Now, when one thinks about skills that lead to better communications, the first skills to come to mind are usually speaking skills, writing skills, and the like. Well, there is a less obvious skill set that I feel is just as important.
Let me demonstrate what I mean. Consider these possible excerpts from a contract.
- “The cost for lettuce is $1.39”
- “The cost for English-to-Spanish translation services is 7 cents per word”
- “Buyer will pay invoice within 30 days”
- “Seller will ship goods within 24 hours of receipt of order”
If you’ve been in purchasing and supply management for some time, you’ve probably seen contract excerpts like this. So what is wrong with them?
In excerpt #1, it doesn’t include a unit of measure. Is it $1.39 per head of lettuce? $1.39 per pound? Per pallet?
Always be sure that you specify the “dollars per what” (substitute your own currency if you’re from outside of the USA). Every price needs a unit of measure.
Now, excerpt #2 has a “dollars-per-what” piece. What could be wrong with that?
Well, consider this: there is not a perfect one-to-one correlation between every English word and every Spanish word. So, what language is the basis for the pricing? If there was an average of 20% more Spanish words than English words for the same text, which basis do you think your supplier would choose?
You see, you really should closely scrutinize these types of communications for every clue of potential misunderstandings.
Onto excerpt #3…OK, Buyer will pay within 30 days. But 30 days from when?
From receipt of goods? From shipment of goods? From invoice date? From date of receipt of invoice? From date of acceptance?
Thirty days from when?
You have to specify this or the chance for a disagreement is high.
Finally, excerpt #4. This excerpt does specify the “from when.” But it still makes me uncomfortable for a few reasons.
First, I must ask: does 24 hours really mean 24 hours? Or does it actually mean “one business day?”
For any agreement containing a 24-hour delivery clause, I would be certain to accompany with a sentence saying something like “Seller acknowledges and agrees that it ships seven days per week, including Saturdays, Sundays, and holidays.” Now, if this discussion leads to the supplier’s admission that the excerpt really means “one business day,” then I would replace “24 hours” with “one business day” and go on to define “business days.”
Is President’s Day going to be a business day? Columbus Day? Secretary’s Day?
What is and what isn’t a business day? To me, an agreement should define these types of time frames without ambiguity.
As with the other examples, analytical skills are essential in order to communicate for maximum mutual understanding.
In Part V, I’ll get to another thing that makes me nervous about shipping dates in contracts.