Tightened Inspection
Meaning ~ High-severity attribute sampling protocol triggered by consecutive lot failures to increase buyer protection and pressure suppliers to improve quality.
Factory Standby Fee
Meaning
Contractual penalties paid to a manufacturer when production lines or labor remain idle due to delays caused by the buyer or third-party inspectors. Most service level agreements define the factory standby fee as an hourly or daily rate. This charge compensates the factory for the lost opportunity to produce other goods.
Idle Compensation
The cost covers the wages of the workers and the overhead of the facility while the machines are stopped. A factory standby fee is typically triggered when an inspector fails to arrive at the scheduled time or when the raw materials provided by the buyer are late. This payment ensures that the supplier does not suffer a financial loss for problems beyond their control.
Delay Trigger
Precise terms in the purchase order specify how much notice must be given to avoid the penalty. If the buyer cancels a production run at the last minute, the factory standby fee becomes an automatic obligation.
Mitigation Responsibility
Both parties have a duty to reduce the impact of the delay once it is identified. The supplier might move the labor to another task while the buyer works to resolve the issue that stopped the line. However, the factory standby fee still applies to the portion of the resources that could not be redirected.
Regular updates on the status of the delay are required to ensure that the production schedule can be adjusted as quickly as possible.