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How to, Construction, Business - 4 min read

How to Manage Supplier Disputes

Jason Hook

Head of Sales and Marketing

Sep 30, 2016 7:19:00 AM

Suppliers are the lifeblood of any successful trade business. After all, if the flow of materials stops, work must stop with it. While good supplier relationships are critical, they can sometimes breakdown and cause budget overruns and delays.

Below we outline how builders can handle disputes with their suppliers, and offer tips on how to avoid them in the first place. 

 

Managing Supplier Disputes - First Steps

An effective resolution process relies on three key elements; communication, documentation and research.

Before taking a supplier dispute to a resolution authority or even a judicial court, you should seek to check the terms and conditions of your contract. It’s important not to jump the gun on escalating a dispute before you’re clear on what agreements have been breached, and what rights you have in this situation.

Contracts with suppliers will often outline their own dispute resolution process. If this isn’t the case, it may be necessary for builders to take initiative and seek a resolution. 

Business Victoria outlines a four step process to managing supplier disputes. The dispute resolution bodies they reference are specific to Victorian businesses, however their four step resolution process is applicable to businesses in all states and territories:

 

1. Make contact with the supplier

According to Business Victoria, disputes can often arise without the supplier being aware of the problem. Contacting the supplier and keeping records of the conversation is an important first step in the resolution process. In this conversation, negotiate an agreement, establish a timeframe and follow up with an email summary of what you discussed. 

 

2. Send a letter of complaint

If you’re unable to make contact with a supplier, like in the instance they’re screening your calls, it may be necessary to send a letter of complaint. Outline the problem, reference any relevant documents or contracts and specify a timeframe for them to reply.

Business Victoria recommends sending this letter via registered post, so you have a record that they’ve received it. Alternatively, if you send your letter of complaint via email, seek to include a ‘read receipt’ that will notify you when it has been opened.

4 time saving email templates 

3. Seek support from an industry association

Industry associations, like the Housing Industry Association, can offer support in a dispute resolution process.

The Housing Industry Association is the largest industry association in the Australian residential building sector, offering support services to over 43,000 builders, manufacturers, contractors, suppliers and building professionals across the country.

 

4. Contact a resolution authority

If all other efforts at solving a supplier dispute fail, it might be necessary to contact a resolution body and seek advice from a solicitor.

The Master Builders Association offers dispute resolution services for businesses in New South Wales and Queensland. Like Business Victoria, the Master Builders Association encourages discussion with opposing parties to reach a resolution informally.

However, if the dispute escalates, the Master Builders Association facilitates a ‘without prejudice conference’ to mediate between the two parties. They also provide a Master Builders holding account where opposing parties can deposit money if the dispute is financial. 

 

5. Avoiding Supplier Disputes

Disputes with suppliers can be costly and time consuming for all involved. Developing strong supplier relationships is the best way to avoid disputes, and allows you to maintain inventory, access new products and secure discounted materials.

However, ensuring you keep records of correspondence and contractual documentation well organised is important should issues arise. Using project management software will simplify this process.

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