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Are We Indispensable?
See also:
Outsourcing — Part One
Outsourcing — Part Two
Outsourcing — Part Three
Outsourcing Information Technology Systems and Services
The Best Gift Arrived in a BIG PACKAGE

he ideal marketing strategy is often believed to be one in which we are indispensable to our customer. This may be found in the monopolistic situation of the public utility that is the sole source of supply for natural gas or electricity. It may be found in the case of the manufacturer whose intellectual property protections are sufficiently secure to make it a sole source of supply for replacement parts and even service.

          An increasingly common manifestation of this marketing strategy for the smaller business is to be found in the establishment of a supplier partnership with a major corporation. In lieu of simply responding to a primary customer's Requests for Proposal to supply essentially-commodity services or products, this strategy calls for the supplier to become a co-designer with its major customer. Often, the supplier now assumes the role of the customer's research, engineering and product development group.

          As competitive realities force the dominant corporations to become lean and mean, an early target is the bureaucratic torpor characterizing most in-house engineering and product development departments. The lead times on product redesign and upgrades as well as new product introductions are simply too long in today's fast-paced marketplace. In the engineering design and development of both the all-new 777 aircraft and the upgraded 737 aircraft, The Boeing Co. transferred unprecedented responsibilities to certain carefully-selected suppliers. The Chrysler Corp. has drastically reduced its corporate staffs, and now relies heavily on its suppliers for the total design of critical component systems for its vehicles. This has reduced overall component costs for Chrysler substantially; equally important, it has accelerated the design and manufacturing engineering processes — often dramatically.

          The Boeings and Chryslers in this Brave New World of manufacturing must now make very early supplier commitments. These procurement decisions can rarely be based upon the conventional procedures of competitive bidding. Today, these decisions are recurrently based upon confidence in the total technical, manufacturing, financial and managerial strengths of the supplier. While direct price is not irrelevant, it is no longer the decisive determinant. The supplier is now the customer's research, engineering and product development department, frequently with direct tie-lines for Internet/telephonic/FAX communications and the daily comingling of personnel. This is a supplier-customer relationship founded upon candor and closeness; traditional adversarial relationships are extinct.

          These emerging relationships offer a Brave New World of opportunity for the smaller business. The associations are based upon trust and intimacy, not simply the lowest competitive quotation. Here, the smaller business enjoys some important competitive advantages. More imaginative and innovative responses to the customer's needs can be offered than have tended to come forth from the customer's own engineering and purchasing departments. The owner/manager can play a crucial role in the vendor selection process and in the eventual contract fulfillment. The smaller business is in an advantageous position to foster the close informal friendships upon which such an alliance must be sustained. The customer is assured that all of the supplier's team is wholeheartedly involved in the business; the engineering design, product development and manufacturing/delivery process will not become submerged in a labyrinthine corporate bureaucracy. In a word, the smaller business can be agile — and agility is the name of the game in today's global marketplace.

          But the smaller business may have to consciously redesign itself to meet this marketing opportunity. In its sharply-focused area of service or product specialization, its research, engineering, and product development proficiency must be preeminent. Through rigorous training, education and/or recruitment, workplace skills must be enhanced. It must genuinely distinguish itself from all potential competitors. Its financial resources may need to be augmented to assume the up-front tooling and development costs being cast off by its major customer. Tougher internal security procedures may need to be introduced to fully respect and protect the customer's industrial secrets, know-how and other intellectual property to which the supplier's employees now become privy.

          But the rewards can indeed be substantial! A formerly arms-length often-adversarial relationship can be transformed into a collaborative working partnership. Instead of being simply a producer and deliverer of essentially-commodity services or products, we become, in fact, the customer's research, engineering and product development departments. The eventual production and delivery of the service or product is, sometimes, even a bit anticlimactic. We have become a vital part of the customer's cerebrospinal axis rather than an interchangeable part of the alimentary canal. As a smaller business, we are uniquely well-positioned to discover and quickly exploit these valued marketplace opportunities.

          We can become indispensable!

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Thomas A. Faulhaber, Editor

Telephone: 617.232.6596 — FAX: 617.232.6674

Brookline, Massachusetts 02446.2822     USA

Outsourcing Placard

Revised:  July  07, 2023 TAF

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