Six Red Flags to Help Avoid a Bad Outsourcing Relationship from Ever Starting

When you begin evaluating service providers the basic requirements are straightforward. You want a provider with expertise in your industry, a deep understanding of your processes and a proven track record of superior delivery. The provider should be responsive, communicate clearly and demonstrate that it wants your business. However, because these are table stakes in the provider game, the selection process often comes down to “soft characteristics.”

Determining which of the qualified providers will work best with you requires a close eye during the sales process. I’ve identified six important soft characteristic red flags that can lead to a potentially dysfunctional and damaging relationship. Keeping an eye out for these signs can help you spot a problem before it is too late.
1.Selling rather than solving. Is the provider listening to you and offering what you need to solve your problem? While challenges may be fairly similar from company to company, no two organizations are identical. There will always be nuances in the sourcing context and the organizational culture that calls for more than a cookie-cutter solution. A streamlined, outsourced process may be institutionalized, but how it is applied will be different in each client organization. The provider should be paying close attention to the particulars of how your company operates, not just selling you something that worked for another organization.
2.Telling rather than listening. During the sales process, does the provider want to do all the talking and follow its 80-slide presentation obsessively, squeezing out every last particle of its sales message before letting you get a word in edgewise? A provider’s listening skills and abilities are critical. A strong indicator that it won’t be an innovative provider is if it sells by presenting to you, rather than engaging with you. This could also indicate an inability to listen to your issues during the actual engagement, resulting in a strained, one-way relationship. Whatever the likely cause – immaturity or lack of skills are two likely possibilities – this behavior indicates fissures in any subsequent relationship.
3.Homogeneous rather than diversified. Homogeneity has its advantages (system interoperability, for one), but it is not what you want in a service provider, especially if your company is global. You want a provider with sufficient diversity to understand your cultural nuances. You want the provider’s diversity to mirror yours, with people from around the world of different ages, at different stages in their careers, and with different experiences and skill sets. Fundamentally, people develop the strongest business relationships with those who are like them. So a provider’s diversity – rather than geographic and cultural homogeneity – is important for the long-term growth of a relationship.
4.Complicating rather than simplifying. Does the provider seem to be making the sales process unnecessarily complex? Simplicity is a good thing, and the provider should be able to define its solution in very simple terms. If a provider overcomplicates, it strongly suggests it doesn’t understand your problem. The attempt to add “bells and whistles” and complicate the solution may indicate the provider is trying to exhibit superior insight and intelligence. It is simplicity that demonstrates a clear view, a true understanding of the right path. For example, if you have a simple order-to-cash process and the provider is trying to tack on more features and attachments, with more technology than required, the provider is overselling through a misunderstanding of your needs or because of a desire to broaden the engagement scope. And it’s critical to remember that a complicated solution is less transparent, which in turn creates more governance challenges.
5.Near rather than far. You want a provider with a geographic footprint such that relationships and decision-making are as close to you as possible. Be very wary if the relationship will require all decisions be made offshore. You need someone near you, onshore, with the authority to make decisions, because the farther away decision-making moves from you, the more it loses context and speed. You don’t want to have to wait until the middle of the night for a conversation with someone several time zones distant; you want a solution at the time you need it.
6.Arrogant rather than supplicant. The sales process offers excellent insight into the mindset of a potential provider. If the provider’s sales team overpowers you with arrogance – if it bosses you around, boasting it has solved problems like yours hundreds of times – you have a problem. Yes, on a certain level, the provider will be your partner, but its purpose is to serve you and its behavior should reflect that fact. Remember, the term is “service provider.” It is there to serve you, and that is how the provider should approach the relationship.

By paying close attention to these six potential red flags, you can make sure that a bad relationship never has the chance to get started. Even though a particular provider’s capabilities and expertise may appear to be your best choice, it still must be compatible with your culture, accessible, and interested in listening and serving you with straightforward solutions. Otherwise, you’re certain to pay a painful price over time.

Risk in New-Product Launches Made Greater When All Parties, Including Supply Chain, Aren't on Board

New products are inherently risky in meeting quality objectives, whether the defects are real or simply perceived by the customer. J.D. Power and Associates released the results of its automotive quality survey in June, highlighting this challenge for some companies that topped the list last year. In the survey, Ford ranked 23rd, compared to fifth place one year earlier, and Hyundai dropped from seventh to 11th place. The Wall Street Journal identified new product designs as a factor that led to this poor performance. Ford had negative feedback on its new touchscreen entertainment and phone system, while Hyundai struggled with new designs of the Sonata and Elantra vehicles. Both of these companies will no doubt rebound to top the list again. Yet, this demonstrates the challenge all companies face in meeting customer demand for quality amid increasing complexity. This wreaks havoc on supply chain professionals, as they adjust demand plans and inventory that require design changes, resulting in rework or scrap.

A recent Gartner study on new-product introduction found that fewer than 50 percent of new-product launches successfully meet original business goals. Nearly one-third of respondents identified quality as the top reason for failure, ranking it among the top five reasons new product launches fail. A lot has been done to embed quality into products since the days of Juran and Deming, yet perfection still eludes even the top companies. The reality is that pressure continues for organizations to reduce new-product time to market, even as the products become more complex, and both design and manufacturing become more global.

Quality Starts With Developing Products and Services for the Total Customer Experience

Quality starts with the customer, but this is not always understood. Leading companies develop products and services that deliver value across the total customer experience. Even the coolest features can flop if there are other barriers preventing the customer from being delighted. The Swiffer from P&G is a well-known example, born when design teams observed homeowners' poor experience using a conventional cleaning mop. Toyota did this with the Tundra pickup truck, observing how drivers used their vehicles as a remote office as much as for hauling payloads. Even Pfizer did this in life sciences by creating the Getquit online website to offer additional patient support when it discovered it was a critical service to ensure success of the Chantix smoking cessation drug.

By observing behavior, companies can better serve a customer's total needs by combining product design and supporting services. To do this best requires the entire value chain team to understand the customer beyond simply marketing's interpretation of those needs. If product development, supply chain and customer support understand the customer well enough, they are in a better position to add value and eliminate waste. Once development starts, it is then necessary to observe the customers using the new product or service to ensure it meets their needs. The more iterations of this process that are completed, the more likely it is to meet customer expectations.

Ensure Business Processes Support New-Product Quality Goals

Even when customer needs are understood, there is plenty of opportunity for the new-product development and launch (NPDL) process to break down. The reasons are many, ranging from poor cross-functional communication to simple inertia in the process that slows cycle time.

A few areas to consider for improving new-product quality include:

• Product portfolios should categorize quality risks — brand-new products carry higher risk than minor extensions and should be segmented and managed accordingly.

• Validate that customer requirements are addressed — scope creep often happens during design cycles, so take extra care to approve any variation prior to commercialization.

• Verify a robust product design and manufacturing readiness — fundamental in design for Six Sigma use simulation and in design of experiments to optimize functionality and manufacturing capability.

• Use a metrics hierarchy that defines total product launch success — measure performance against strategic business value and operational goals for a complete view.

• Post-launch feedback and corrective action — capture customer feedback from various sources, including directly, through channel partners and via social media, and take immediate action.

Organizational alignment can be a barrier to success. Gartner's Simon Jacobson has written extensively on the topic and suggests it's time to take an end-to-end view of quality across the entire value network. Yet, Jacobson's research finds that quality still resides in silos and that supply chain organizations' ownership of quality is in its early stages, with most supply chain organizations claiming responsibility for quality management only 47 percent of the time (see "Best Practices for Taking Quality Beyond Manufacturing and Into a Business Capability Supporting the Value Chain").

Technology plays a role supporting the business processes that lead to these new-product quality goals. Whole hosts of technology providers specialize in quality management that extends beyond new-product launch into manufacturing and corrective action. Specific to the process of NPDL, product life cycle management (PLM) applications lay a strong foundation, but must connect to an end-to-end business process. PLM core capabilities include managing customer needs, product portfolio management, direct material sourcing, collaborative product-process design and product data management. Simulation and virtual reality help enhance new product quality, along with various capabilities to ensure manufacturing readiness and to support installed customer product. This extends to industry-specific process support such as validating that complex system customer-design requirements are met.

Of course, total quality must extend further than what PLM or any one application can provide alone. Several manufacturing execution system (MES) vendors have quality functions, and are expanding their touchpoints into PLM. ERP vendors also support PLM, while integrating it into broader business processes, including demand and supply planning, scheduling, and inventory management, among others. Before investing in any of these technology solutions, manufacturers and retailers should identify the root cause of new product quality failure and define the appropriate business process that will address their need. Technology providers also specialize by industry requirements, such as those that specifically target apparel, food and cosmetics, among others.

New product quality will always be a challenge as long as time-to-market cycle times are squeezed. However, improvement can be achieved with a holistic view of quality that starts with the customer and is viewed as an end-to-end business process.

Thanks to Gartner for their input on this posting.

Know Where Your Components Come From

Its is important if you use any of the materials discussed below that you do not get into trouble with the US government due to non-compliance.
New companies especially are probably not familiar with Dodd-Frank and its provisions.
If you are not sure about the issues mentioned below do your research and homework with your suppliers.

As a compliance manager at TriQuint Semiconductor, John Sharp has spent much of the past year focused on one little-known compliance rule before it goes into effect. To satisfy it, he must query hundreds of suppliers to figure out the origin of some 450 materials used in his company's products. It's an unusual burden, he says, because "we've never had to go back through our supply chain to determine the source of something."

Until now. A provision in the Dodd-Frank financial reform law requires publicly traded companies to scour their supply chains for so-called conflict minerals mined in the Democratic Republic of Congo and surrounding countries. If a company finds that minerals used in its products or components come from the area, it will need to dig even deeper to determine whether its purchases indirectly help fund ongoing violence in the region. The final version of this rule will likely require that companies publish their findings every year and explain their due-diligence process.

Thanks to CFO magazine for its assistance with this post.