When quality fails

Building a high-performance vehicle requires precision parts that all fit together, are of a high standard, and are reliable. Only the very best petroleum must fuel the high-performance vehicle. What if, for instance, you go to a reputable fuel supplier and request that they fill your tank with high-octane unleaded fuel? Then the devastating moment, you discover that your supplier topped up your tank with sugar water. The risk of severe internal damage to the engine is imminent, with disastrous results.?

A potential risk to your business is when suppliers deliver or supply incorrect, inadequate or substandard products to your business. An inferior quality product provided to a producer or manufacturer of goods could impact the quality of your company's product to its customers. The consequences may lead to injuries, sickness, monetary losses or may cause reputational damage as your product did not live up to the expected standard.

Consider a company that manufactures industrial-strength cleaning chemicals used in offices, crime scenes and shopping centres. The company orders a certain amount of chemicals required to be mixed to make the soap strong enough to clean the most difficult of stains out of concrete and ensure that little to no bacteria is left behind. The company unknowingly receives a substandard chemical batch from a large supplier. It uses the chemical in its soap mix used in butchery to clean the table and floors after hours and to ensure that all regulatory requirements are met. However, the soap does not kill all the bacteria, and many of the butcher's clients become ill. The butcher may now hold your company liable for any damages they may suffer.

In a highly regulated industry, such as prescription drugs, it is unlikely that the supplier would deliver a poor-quality product. Think of the consequences of medicine being made with an ingredient of poor quality. Not only are the consumers becoming ill or not getting better, but as a manufacturer of prescription drugs, you have not kept up a regulatory standard and may be shut down as a result.

Many risks may arise due to the poor quality of products, damages to machinery, delays in manufacturing, injury or loss of life.

A supplier will contract out of a product's poor quality, thereby shifting the liability to your company.

How do you manage these risks?

1. It is possible to transfer the liability to consumers, therefore contracting out of the liability as the supplier has done.
2. It is also advised to take out insurance against the poor quality of the product.
3. One of the more popular strategies for dealing with these risks is an active quality control policy which must be strictly adhered to and enforced.

When you are responsible for filling up a high-performance vehicle, you want to be sure that your client will drive away with the best quality product possible. Treating, Avoiding and Transferring the risks are essential to mitigating any claims for loss or damage.

If you are interested in assistance with assessing your Supplier Risk or have any business legal enquiries, we encourage you to BOOK a Free 30-Minute Strategy Session with Yolandi Erasmus at https://10to8.com/book/iqzdxogocjoqhdlyvp/1662935