Volkswagen has been the poster child for poor decision-making lately.
One of their current challenges is with two suppliers who refuse to deliver to them, and multiple plants are shut down or scheduling reduced output as a result.
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If you single-source and VW-type problems arise, examine why the relationship failed and what you could do better next time.
In response to this, VW has announced it is reconsidering its supplier strategy of single sourcing. Are they learning the right lesson here?
I don’t know who is right and who is wrong in these disputes. What I do know is that single sourcing is not the problem. Single sourcing with the wrong company or treating single source suppliers poorly may be the issue.
Choosing to single source is a decision to partner with another company. The reduced complexity and potential for mutual benefit are advantages well worth considering.
So how does one single source without putting your business at risk? Here are nine ways to single source successfully:
- Select appropriate items to single source
- Select a suitable partner
- Behave as a partner
- Work together to improve both operations
- Share and leverage expertise
- Review supplier and your own sustainability and succession plans annually
- Do more than the agreement requires
- Share challenges and work together to overcome them
- View the relationship as one organization that happens to have different owners
I have no reason to believe that VW chose the wrong items to single source. It’s much more likely that items two through nine are the basis of the costly argument. If you’re not willing to commit to these behaviors or can’t find a potential single-source partner who is also willing to follow these commitments, continue to dual (or more) source.
If you single-source and VW-type problems arise, don’t throw the baby out with the bathwater. Examine why the relationship failed, and what you could do better next time. Learn the right lesson, not the easy one.
As published on American City Business Journals