Supplier Partners in a Globally Competitive World
It’s a tough time to be talking about supplier “partnerships.” With companies
throughout the Western world looking at the prices of parts from China, India,
Vietnam, Russia, Eastern Europe, and other low-wage countries, it’s hard to imag-
ine looking beyond price. Radical attempts to cut costs by suppliers, including
automation, plant consolidation, and even lean techniques, seem in vain when
the purchase price of raw materials for production in a typical Western company
is greater than the price a supplier in a remote province in China is charging for
the finished component. If the problem is competing based on cost, and the
solution is to chase the lowest price in the world, then the supply chain prob-
lem becomes a straightforward logistics exercise: Get the latest software, run the
optimization models, and figure out the lowest cost way of getting the best total
cost of piece price plus logistics.
But the critics will argue that quality will suffer. The low-wage countries are
low wage for a reason. They do not have the same high quality of labor as the
developed countries and thus cannot produce the consistently high levels of
quality that have become the price of entry into modern business. Even that
argument breaks down. Education levels are high and getting higher in these
countries, people work hard and long hours, and they are eager to learn. Their
acceleration up the learning curve has been nothing short of miraculous.Develop Suppliers and
Partners as Extensions
of the Enterprise
Chapter 12
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