Earlier this year my company worked with an OEM client on a case-study involving serial supply failures in China. The OEM is a well-known, publicly-traded, industrial equipment provider with over twenty years of outsourcing experience. The EMS companies are both reputable industry sources; one headquartered in Asia the other in North America. The project was a forecast-based, batch build of a relatively simple controller-type box (less than a dozen configurations) in single container-sized weekly quantities. In this case, supply failure was defined by the OEM deciding to pull the business from one EMS company and move it to another; which has now occurred twice. In other words, the OEM is now working with their third EMS supplier on this project (in less than two years).
Hopefully, I've got your attention. Before we continue, please respond to the following:
What was the root cause of the failure in the above example?
a. Intrinsic problems with manufacturing in China
b. Issues related to the OEM's approach
c. Issues related to the EMS value proposition and/or execution
d. All of the above
e. None of the above
f. If you don't get to the point PDQ, I'm going to stop reading this article!
The correct answer is "f," which is the one you probably chose as more than a few of us working in outsourcing (either OEM or EMS) suffer from a chronic and debilitating psychological syndrome we call "Recognizing Realities Deficit Disorder" or R2D2. This is actually a weaponized version of the more familiar Attention Deficit Disorder (ADD).
No worries, it's not your fault. We don't blame you. You didn't catch this disease because you were a bad girl/boy and refused to eat your spinach. You contracted it by working in a crazy industry that has made you (well...) a little crazy. And for senior management, this disorder is even more serious as it can actually cause blindness.
The folks who are really to blame are (in no particular order):
- Every business school who stopped talking about Joe (if you don't know what that means then it doesn't apply to you).
- Everyone who stopped thinking about manufacturing the day the term "core-competency" was coined.
- Every C-Level executive who thinks more about EPS than product innovation (not to be confused with market or business innovation, as those are the dung heaps where the R2D2 germs thrive!).
- Anyone who works on Wall Street or any other street where people discuss credit-default swaps or any other imaginary financial instrument.
- And of course George W. who is, by default, the recipient of all not otherwise assigned blame.
With that said, let's (finally!) take a look at what happened, why it happened and what we can learn so it doesn't happen to any of us in the future.