What is a common action to address supplier underperformance?

Addressing supplier underperformance often involves various strategies, depending on the circumstances and the severity of the performance issues. Invoking penalties and termination is a robust approach that underscores the seriousness of supplier obligations and the impact of their performance on your organization. This action serves as a formal mechanism to hold suppliers accountable, ensuring that they adhere to the contractual terms. By implementing penalties, you can incentivize suppliers to rectify their performance issues promptly. In extreme cases, where a supplier continues to underperform despite opportunities for improvement, termination of the contract becomes a necessary step to protect your interests and seek alternative suppliers who can meet your requirements.

While providing additional training, offering bonuses, or increasing order quantities may be less confrontational approaches to address performance issues, they don't always effectively incentivize immediate improvements in supplier performance. Additional training may take time to implement and not guarantee results, while bonuses might not be appropriate if the supplier's performance is currently unsatisfactory. Similarly, increasing order quantities does not directly address the underlying issues affecting performance and could potentially exacerbate the problem if the supplier is unable to meet existing obligations.