Dec 23, 2019
Creating a clear and instructive purchase agreement is the first step to building long lasting partnerships with your factories. A purchase agreement sets out the terms of your relationship so that nobody feels as if they’ve been taken advantage of if something goes wrong. Carlos shares the five must have pieces you need to create the perfect purchase agreement.
First up, you need clear terminology. Make sure that you speak to everything you’re purchasing as clearly and concisely as possible. For instance, if you have a 60 day manufacturing time, is that 60 business days? Calendar days? Who’s calendar are you using? Do holidays count? Take the time to clearly define the expectations on both sides and you’ll save yourself a ton of headaches.
Second, take the time to do quality control during and after the sample stage. Carlos gives the perfect example of how this part of your relationship can go wrong. You find a product, you like the product, you ask for a sample, and the factory sends you a sample that they didn’t actually make. You approve the sample, it goes into production and what you receive is not what you ordered. Clearly define your expectations at this stage to avoid costly mistakes and additional expenses in the next section.
Next, you need to define the terms of inspections. You should ALWAYS have the factories inspected and know that this is an expense that you will need to cover, initially. If the factory doesn’t pass inspection, then be sure to note that they are responsible for subsequent inspections. If you’d like more information on the inspection process, check out episode 1 here.
Listen in to learn how to address returns as well as tying pay to performance. You can add many other things into a purchase agreement, but these are the things you must have. Carlos digs deep to give you the language and examples to use in your agreement and while you craft it. What things do you recommend to put in a purchase agreement?
In This Episode:
[00:44] Welcome back to the show and get ready to learn about purchase agreements.
[03:02] What is the difference between a purchase order and a purchase agreement?
[05:22] Learn why terminology is the 1st important part of the purchase agreement.
[08:28] The 2nd part is quality control after the sample stage.
[14:37] Number 3 is clarification on inspection types, times, and results
[19:29] The 4th important part of a purchase agreement is returns, refunds, and damaged goods.
[27:12] And number 5, tie pay to performance.
[32:24] Carlos does a quick recap of the 5 must have pieces of the anatomy of a purchase agreement.
[32:53] Want to be able to better visualize this? Carlos has a template for you.
[34:05] Carlos gives two final pieces of advice to keep in mind when creating your purchase agreement.
[39:39] How have purchase agreements impacted your business?
Links and Resources:
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