Pay your suppliers

A few weeks ago, Christopher Paris published an article about companies who don't pay their suppliers—or rather, strictly speaking, companies who make their suppliers wait four, five, or six months to get paid, even when the contract plainly requires payment in 15 days net. He describes having dealt with companies just like this, and I believe it.

Gothmog rejecting an invoice.

Back when I was first starting out, I worked indirectly with a company I'll call Gothmog Enterprises. (Don't even try to guess who they were in real life; my LinkedIn profile doesn't go back that far.) Gothmog Enterprises was a very large company. And there were persistent rumors that they preferentially did business with small, local suppliers who were desperate for the orders. Then when the invoice arrived—so the rumors used to claim—Gothmog Enterprises would pay 60% and stamp it "Payment in Full." This left the suppliers with a painful choice: continue to do business with Gothmog, knowing that they would only ever get 60 cents on the dollar; or cut them off, and be cut out of the massive volume of business that Gothmog made available. Of course it was a terrible choice for the suppliers, and for Gothmog to force it on them was unambiguously evil. 

Maybe it was only a rumor and never really happened.

"ISO 9001 would never let you
mistreat your suppliers!"

Now, Chris Paris sells consulting related to management systems, for example (but not only) those certified to ISO 9001 or AS9100. So it would be tempting to think he shouldn't have to deal with this kind of problem. You might even think to yourself, Surely a company with a functioning quality system wouldn't be allowed to play games like this with their suppliers! But this would be to look at the world through rose-colored glasses. Not sure you agree? Let's check.

ISO 9001:2026 covers all the requirements relating to suppliers in clause 8.4. (Property belonging to suppliers but stored at your workplace is covered in clause 8.5.3.) There is no prefatory material in clause 8.4, but just three subclauses.

• Clause 8.4.1 says that anything provided by a supplier and ultimately bound for your customers must conform to requirements, and must be put under a suitable control to ensure that it conforms.  
• Clause 8.4.2 says that you have to figure out what controls are appropriate, and whether to apply them to the things you buy, or to the suppliers themselves, or both.
• Clause 8.4.3 says you have to tell the supplier about all your requirements, and about all the controls you intend to apply.
• There's nothing about paying your bill afterwards.

And that's it! Oh, I suppose with this latest edition of the standard you could try to build an argument around clause 5.1.1(i), which says that top management is supposed to "promot[e] quality culture and ethical behavior." Maybe you could argue that letting your suppliers wait for months before they are paid is a funny kind of "ethical behavior." It would certainly be worth making the argument. But don't expect to win.

This might look like a gap in ISO 9001, but I'm not sure I agree. I'd rather call it a limitation of scope. ISO 9001 was never intended to describe ever single thing a company should do in order to qualify as praiseworthy or good. It is specifically a quality management system standard, which means that it should be focused strictly on customer satisfaction. If I can make my customers happy while being an unethical jerk to my suppliers, ... well, morally I still shouldn't do it; but as long as my customers don't know that I am an unethical jerk they won't care. In the short term, before my picture starts showing up on social media headlining lurid exposés of my crimes and misdeeeds, my customers will still be satisfied. And in that sense—for that short term—my orc-ish behavior towards my suppliers is out of scope for ISO 9001.

Where the treatment of suppliers does re-enter the larger Quality ecosystem is in the more general consideration of the seven Quality principles (spelled out in ISO 9000). One of these principles is Relationship management, which covers relationships with all interested parties. And in case it's not already obvious, suppliers are always interested parties. The point of the discussion of these principles in ISO 9000 is that even if yes, technically a company can get away with observing the letter of the ISO 9001 requirements while still being a scoundrel in other respects, in the long run it's not a sustainable strategy. Over time, suppliers will walk away from them, blacklist them, and refuse to do business with them—exactly the way that Chris Paris describes in the article I mentioned at the beginning of this post! Any company who wants to secure the ability to do business in the long term has to do more than narrowly follow the rules. 

Among other things, this means paying suppliers.