Quality? Supply Reliability? Or Management Expectations?

In last year’s CPO Agenda inaugural debate on Assimilate to Accumulate, Martin Lockstrom, of the BMW-SMI Center for Purchasing and Supply Management at China Europe International Business School, said that the most difficult thing is not necessarily to manage the Chinese suppliers but managing HQ expectations on these kinds of things.

With all of the issues making the news in recent years with respect to outsourcing from China around supplier quality, reliability, and intellectual property, it’s important to remember that the biggest issue is not always the supplier, who may respond well to sincere attempts at supplier improvement initiatives, but management expectations. It is amazing how many executives still believe that outsourcing will fix all their problems and that, because outsourcing to China has been going on for over a decade, the supplier will deliver high quality and cost savings off the bat. While the irrational exuberence is not at the high it once was, there are still executives who hold on to unfounded beliefs because “it worked for the competition”, failing to realize that the competition may have worked years on supplier development to get the performance they are achieving.

Done right, sourcing from China will pay off, but great results can still take time.