Originally Published MDDI March 2001
Safe Sourcing: To Build a Beautiful Relationship, Ask the Right Questions
Few would dispute that outsourcing can be an effective tool for OEMs seeking to contain costs and speed time to market. Choosing a partner, however, is not simple. You know the obvious questions to ask: Does the company have appropriate quality systems in place? Is it able to cost-effectively manage the project? Is the firm financially stable? But there are a host of seemingly secondary issues that, if neglected, could result in a rocky relationship with your supplier. A session on outsourcing at MD&M West in January focused on this aspect. I spoke with panelist Douglas Stockdale, a principal at DS Consultants (Rancho Santa Margarita, CA), regarding some of the elements to consider when mapping an outsourcing strategy.
Striking up a relationship with a supplier is like "hiring a person on your staff," says Stockdale. "Except that it's a very big person. Companies have personalities. That can affect how your partnership goes, because you are absorbing them into the organization," he notes. Latent corporate culture clashes aren't always weighted very heavily in what Stockdale calls the decision matrix. It's an oversight that some companies live to regret. Perhaps the firm you are contracting with isn't forthcoming with information and needs constant prodding to provide project updates. Conversely, some companies will flood you with more information than you need or want. It's not always easy to assess these types of things, says Stockdale, but it's well worth the effort. Broach the subject with your potential partner's references, he suggests.
Stockdale also stresses the use of a fact-based approach to decision making. That may seem elementary, but he has seen countless examples of companies relying on subjective data to reach a decision. "OEMs may choose a supplier because they have worked with him in the past, and they will simply assume that he can handle a new technology without really looking into it," he says. Or a company may base its decision on a glowing recommendation it has received from someone. Upon closer inspection, the company may discover that two or three key engineers who were responsible for much of the core work have left the firm, says Stockdale.
He also places stock in drafting what-if scenarios, a virtue he learned the hard way. "I was involved in one outsourcing project where the supplier had the capacity to fulfill the OEM's obligations, but what we didn't know was that it was committing the same types of capacity resources to another very big client," he recalls. "We both said yes, and the next thing I know I'm having trouble with my delivery schedule." Scenario analyses allow you to clarify many of the hidden issues that might affect outcomes. "You determine the probabilities, stack them up, and ask yourself, 'Does this make sense?'"
Along the same lines, don't stop thinking about tomorrow, to borrow a phrase. OEMs sometimes neglect to take into account future needs, notes Stockdale. "Do the suppliers you are considering have the capacity to grow with you?" he asks. And if they do, ask if they are considering making commitments to other clients that could jeopardize their ability to meet your potential demands, Stockdale reiterates.
The bottom line is that it pays to do your homework. Applying a methodical approach to the sourcing process at the outset can prevent problems from erupting the morning after when you can least afford them.
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