Wednesday, April 6, 2011

Sourcing: Choosing a supplier based on values.

Sourcing: Choosing a supplier based on values.
Can a sourcing decision be both strategic and socially responsible? For XXXXXXXXXX, the answer was yes. Over ten years ago, management at XXXXXXXXXX was deciding whether or not to outsource the building of frame assemblies for the gas circuit breaker product. The frame assembly was critical to the support and structure of the breaker, but building the assemblies required large amounts of space and took a lot of time. While the analysis of whether or not to outsource was being conducted, a senior member of management was introduced to XXXXXXXXXX, a local non profit. XXXXXXXXXX focused on providing training and employment opportunities to individuals with disabilities or other barriers to employment. As part of XXXXXXXXXX vision of being a good corporate citizen, the company’s philanthropic efforts focused on helping those with disabilities. XXXXXXXXXX mission of helping people with disabilities find satisfaction through employment was a match for XXXXXXXXXX philanthropic values.

The question was- could the frame assembly be outsourced to XXXXXXXXXX? XXXXXXXXXX had the space, the workers, trainers and the desire, but not the experience. Even though XXXXXXXXXX could have chosen any number of fabricating shops to create the assemblies, they made a decision to partner with XXXXXXXXXX. Initially, it was a difficult partnership as XXXXXXXXXX was not able to consistently produce a quality product. Their defect rate was 10 times the acceptable standard. Instead of dropping them as a supplier, management at XXXXXXXXXX made the decision to help XXXXXXXXXX succeed.

How did they help XXXXXXXXXX improve the quality of their product? XXXXXXXXXX gave tours of the facility to the entire XXXXXXXXXX staff. By seeing firsthand how the frame assembly integrated into the gas circuit breaker product, XXXXXXXXXX workers gained a better understanding of why the quality of their product mattered. In addition, XXXXXXXXXX set a clear expectation of the defect rate and the quality standard. By setting and communicating the quality standard, XXXXXXXXXX was treated like any other supplier. It made them realize that XXXXXXXXXX wasn't treating them like a charity case, and that XXXXXXXXXX was serious about the relationship and serious about the quality that was expected. XXXXXXXXXX made a commitment to XXXXXXXXXX and XXXXXXXXXX committed to building a quality product. Today, XXXXXXXXXX is the premier supplier of frame assemblies to XXXXXXXXXX; their frame assemblies consistently exceed the quality standard.

Question: The decision to outsource a function can be easy, but finding the right supplier is not. If finding the right partner is part of the strategic decision, isn't it more interesting when the choice of supplier is values based rather than solely financial?

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