Which statement best describes the use of corrective actions or credits in supplier disputes?

• A. They should never be used.
• B. They are applied per the contract to address quality issues.
• C. They automatically terminate the contract.
• D. They replace the need for root-cause analysis.

Answer: (B)

Corrective actions or credits are a contract-based remedy for supplier quality issues. Using them as defined in the agreement provides a structured way to address defects: the supplier is required to take specific corrective steps to fix the problem, and credits or other financial remedies can compensate for the impact of the defect. This approach keeps the resolution process consistent, enforceable, and aligned with what was agreed, rather than relying on ad hoc fixes. It’s not about automatically ending the contract; termination is a separate option if breaches persist. It also doesn’t replace the need for root-cause analysis—investigating the underlying cause is typically needed to select the right corrective actions and prevent recurrence.