I have client now, a mom-entrepreneur, who has a very thorny but not uncommon problem. She has a product which has shown strong US sales in recent years. Right now she is buying the parts from China and assembling in the US. However, as her business grows she has identified a need to do the entire assembly and packaging in China. So she approached me after trying unsuccessfully to work with some China vendors on her own. I have found her some vendors who have given her acceptable samples at well below her target costs and we are ready to move to the next step in the project: narrowing down the list of vendors to 2-3, requesting production samples and then visiting the facilities before placing an order. However, as we get closer to moving production to China and moving assembly of the entire product to a new vendor my client is becoming uneasy because she is very comfortable working with one of her current suppliers ( they provide her with a very important part of her product). She has asked me if we can use this supplier to provide parts to the new vendors since they are all in the same area. This strategy is fraught with risk for the following reasons:
1.) If her current vendor delivers a bad batch of product to the new factory or has a late delivery then the end result may be a blame game. I have worked with many vendors over the years who do not take the responsibility for mess-ups. If there is a mess-up with one of your orders then you can expect that one side will blame the other, especially if you are the one who has designated the parts supplier to the FTY. It is best to let vendors do their own outsourcing so they are accountable.
2.) If the new factory and the current factory just do not get along for one reason or another it will impact your production.
3.) As regards the current project the new factory may be less enthusiastic for my client’s orders if I now tell them that a major component of the piece will be outsourced. They may also feel some resentment towards her current vendor for supplying parts that I had initially asked them to quote on. The message it sends to the new factory is that their parts are not good enough.
Having said this, I told my client that I never encourage anyone to leave a vendor they are happy with. Once you leave it is sometimes hard to go back.
So what advice do I offer my client? I have told her that if she feels her current parts supplier is special and she has a very good working relationship with them ( they honor their costs and send her quality product on time etc) then she does not want to cut this tie. She should discuss her situation with the vendor to see if they can help her find another factory to do final assembly using their parts. If they are a good vendor and they want to keep her business they will make an effort to do this. If on the other hand my client is romanticizing her relationship with her current parts supplier, so to speak, because they are her only source now, then maybe it would be OK to place the production in someone else’s hands albeit in small increments. One other solution would be to start all over and approach new vendors telling them that my customer’s current vendor will provide one of the parts and we just seek final assembly and packaging ( in this way the problem as I laid out in # 3 above would be avoided though there would still be risks by designating a supplier to your vendor instead of letting them find one on their own).
The lesson to be learned here is that you really need to sit down and identify your needs, and look at things from every angle possible before you make important decisions about your production.