At the end of Part IV of this series, I talked about a reason to be nervous about a contractual excerpt such as “Seller will ship goods within 24 hours of receipt of order.” In that post, I ranted about ensuring that 24 hours meant 24 hours and not one business day.
But, that’s not all that makes me nervous about it.
I also get nervous when contracts specify lead time based on shipping and not lead time based on delivery.
Imagine having a contract containing the clause “Seller will ship goods within seven (7) calendar days of receipt of order.” An internal customer approaches one of the buyers on your team on a Monday about an item covered by this contract. The internal customer asks the buyer for the lead time. The buyer replies that the lead time is seven calendar days. The internal customer places an order.
When do you think that the internal customer will be expecting that item?
The following Monday, right?
Well, the item will ship on the following Monday. But if it ships via ground transportation from Los Angeles to Pittsburgh, it won’t be delivered until way later.
That’s why I recommend having contractual lead times documented to be include transit times – the time frame between order placement and order delivery. The only case where I would base lead time on shipping would be when my organization controlled the transportation, such as in cases of buying internationally.
But even agreements with the best laid plans and featuring perfect communication of delivery time frames can be marred by late deliveries. We’ll talk more about that in Part VI coming soon.