Communicate with your suppliers
In working with their supplier for tires, Foreign Tire Sales, Inc. (FTS) had a problem. They had experienced field failures with their tires from a Chinese partner, Hangzhou Zhongce Rubber Co. This supplier had provided FTS with reliable tires for a number of years. While the cause for the tire failures is disputed, FTS’s owner Richard Kushkin claims that the problem resulted from a design decision made by their supplier to eliminate gum strips from the tire design to save money. The interesting part of the story is that when Kushkin tried to contact the supplier, they would not answer his e-mails. Since FTS was a small company operating on a shoestring budget, they did not have close contact with their supplier. If FTS had been more active in working with this supplier, problems could have been averted. Face-to-face interaction is essential on a regular basis. At times, firms can contract with an international representative to handle their affairs in a foreign country.
We all know of problems associated with communication that can lead to quality issues. Suppliers must show that they understand and will follow the specifications. After that, experience has shown that you must work closely with international suppliers to ensure that specs are followed over time. One executive refers to this as “performance drift.”
Understand the legal framework
Legal differences are magnified when going overseas. Lesser-developed-countries may have lesser-developed legal systems. By the same token, socialist countries may more closely monitor activities. Firms have long complained about import laws in Japan. Firms should consider Hong Kong their legal window to China. Chinese contracts should be written such that their suppliers must settle disputes in Hong Kong courts. The Hong Kong legal system has case law and follows traditional English contract law for handling disputes relating to liability and supplier issues.
An international purchasing agent at SkullCandy Corporation has the tongue-in-cheek title of Sourcerer. While this is humorous, it is also somewhat true. When sourcing internationally, there needs to be a special kind of magic based in smart business practices. Instead of pointing fingers at suppliers, firms need to examine their own decision-making and carefully evaluate where outsourcing makes sense.