Are penalties on suppliers for non-performance considered productivity?
Recommendation
Penalties are a cost control or risk management mechanism, designed to enforce contractual obligations (e.g., delivery delays, quality defects).
They serve to protect the organization from losses or inefficiencies caused by supplier failures, rather than directly improving operational efficiency or output per input.
While penalties may encourage suppliers to improve performance, the penalty amounts themselves do not represent an increase in productivity - they are more like cost offsets vs AOP.