Target recently announced it will be increasing late penalties up to five times for suppliers starting May 30th. Their goal is to tighten deadlines, raise fines for late deliveries, and penalize up to $10,000 for inaccurate product information. Some question if this “hard ball” approach will be effective in the long term.
 
Dr. Chad Autry – William J. Taylor Professor of Supply Chain Management at the University of Tennessee at Knoxville – believes there is a better approach for companies to work more collaboratively with suppliers.

 

Dr. Manrodt, Professor of Logistics at Georgia College and State University, also agrees collaboration is key.

 
“Using penalties definitely works, in the short term. But it is myopic and ineffective in the long term,” Manrodt said. Manrodt recommends that firms looking to reduce cost in the buyer-supplier relationship should consider using a highly collaborative sourcing business model – such as Vested – which operates with a “What’s in it for We” mindset using transparency and shared risk/shared reward economics to align interests.

 

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