Need Advice--Supplier/Customer Issue
Posted 09 April 2012 - 03:13 PM
We had a customer that wanted to do a custom inventory program back in 2009. They ordered 5 custom items, all done in big quantities overseas. To make a long story short, the program has not taken off at all, in fact is has been a disaster relative to their expectations and sales forecasts.
When we first became involved with the progam, we were asked to fulfill the primary piece "at cost" and then on the other 4 items--we would get a fulfillment fee to cover the costs. Based on their expectations and market analysis, they were confident they were going to be doing multiple reorders of all their items, especially their primary staple piece.
As you can guess, 2 + years later, most of the merchandise is still there. Because we were not making any $$ at all on the fulfillment and their "guaranteed" reorders never materialized, (in fact, factoring in all costs, we were losing $$ on this program month after month), I told them we were going to have to increase the fulfillment rate on the main piece starting in January. They were not happy about it, but I explained that we couldnt continue to lose $$ and their projections vs. reality were way off (I said it much more tactfully lol). We never had a formal agreement, just some parameters we sketched out and agreed upon with on a gentleman's handshake. They paid for and owned all the inventory up front, so there was not much risk involved with us.
Anyway, we did an inventory on the merchandise in January, and when we did , we noticed that one of the items that has a fabric component was "spotting" to the point where it was unusable. After inspection, we noticed that it was very prevalent--we inspected about 10% of this product and came up with a 70% fail rate. We contacted our factory and they said it has been 2 years and they were very hesitant to do anything about it. This issue cropped up over the course of several months as it has been in storage units. We did a spot check when the merch arrived and there were no issues, so the spotting/staining has evidenced itself over the past few months. Since the merch has moved so slowly, we dont handle it very often and therefore were unaware of the issue.
At any rate, our customer determined that they did not want us to do the fulfillment anymore because of our rate increase, and informed us on a Monday that they were coming to get the merchandise and that we needed to do a final inventory that week and they would pick up the goods on Friday. Nothing like having to rearrange your whole week!
We had to let them know about the notebooks issue and that we were in the process of having them replaced. Since these are not selling well, they immediately wanted to check into the feasibility of getting a refund. We notified our factory about this issue in late January and they still have been hem-hawing about a resolution. They scoffed at a refund because it has been two years, which I understand, but they have to take into consideration that this didnt manifest itself until several months after we received it and we didnt notice it for even longer.
So as it stands--it looks like our factory will pay for half of the cost of the replacement goods with us bearing the other half. That is their proposition. They wont entertain the idea of a refund at this point. The customer is more interested in the refund but unfortunately we are not in a position to just write them a check for a full refund 2 years after the fact, especially without getting anything back from our factory. What do you think our responsibility is to the client? They have ordered barely anything since 2009. We have jumped through hoops for them--running merchandise all over town, accomodating odd-hour requests (i.e. bringing inventory to them on a Saturday), even giving them a couple of orders and fullfiment at cost. All of this seems very unappreciated.
How would you handle this? I am at a loss--I guess our best bet is to replace the goods and pay for half the costs as that seems like the most "right" thing to do and although it will hurt financially, won't break the bank. We would be out several thousand $$ with the replacements but it would be pretty staggering for a refund.
Posted 09 April 2012 - 07:56 PM
At this point all you can do is stop the bleeding.....And it may get ugly........Both you and you supplier are doing your share....I would "insist" on replacing the defective goods and get the rest of the stuff out of your storage ASAP....Put that on the table and see what happens.....
PS....As far as the supplier, they deserve some support in the future for their contribution....
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Posted 10 April 2012 - 03:04 PM
WOW........this story sounds very familar as we have a client that we did a large import job for 2.5 years ago, they had projected large numbers and so on........then the company went under manditor budget freezes........all those numbers went right down the toilet. long store short the client started to release some product last month. I received a phone call from the client stating the product in the boxes smell like ......the box, now each items is poly bagged but I can only guess anything sitting in a box for 2 plus years might start to smell like a box...... anyways I simply told the client we open all the boxes and let them air out and we could rebox all the items if they were willing to pay for boxes & labor..... after all they have been sitting in our climate controlled warehouse all this time for free, we clean the boxes off every month to insure the boxes are not dusty and all that. ( you could eat off our warehouse floor if you wanted to) the client called back and said they didn't want to pay for that so they opt for Fabreeze.....you heard me correctly....the had us pick up 2 bottles of Fabreeze and now they have us open the boxes before they go out and spray a couple squirts of Fabreeze in the box......... go fiqure, they came up with that idea. CRAZY......
good luck on this project.......
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