I remember the days when the prime aircraft and engine manufacturers performed most of their machining and special processes within the boarders of their own real estate. And some of those facilities were larger than many towns, employing large populations of diverse skill sets.  Organizations had broad and deep knowledge of the processes which made up their products.  They truly knew their product.  Today, the world is a much different place. 

In the 1980's there was a huge push to move work overseas to receive "off-set" credits.  Off-set is a type of quid-pro-pro in that one country says I'll buy X-number of aircraft (or other products) from you and in return you will place X-amount of work in my country.  Certainly sounds like a fair deal.  And, for the most part the work was going to countries of industrial maturity and capability.  But this led the way to the global outsourcing we see today. 

Today's reality is not about getting the off-set credits, the mantra is the lowest price.  Hence, complex work is finding its way to places which may not have the system and industrial maturity to ensure sustained quality and safety.  Adding to the challenge, some organizations have forgotten about the concept of "cost of poor quality". 

The cost of poor quality goes far beyond the expenses of creating fixes to problems.  It also encompasses the expenses related to litigation, lost customer loyalty, lost consumer trust, and so many other variables which are hard to measure if they are not part of the thought process. 

Organizations need to understand the entire expense of doing business.  This not only includes the immediate expenses of creating value and getting product to the customer.  But also the longer-term liabilities if the processes of value creation are not appropriately controlled.  Here are a few things to consider when managing a value-stream: 

• Does the organization have the know-how to oversee their value-stream?
• Does the organization have the resources to support their value-stream?
• What evidence does the organization have to substantiate the capabilities of its suppliers?
• Is risk assessed prior to supplier selection?
• Are there risk mitigation plans in place?
• Is quality determined at the place of value creation, or at the tailgate?
• How will the organization measure and monitor supplier health?
• What will the organization do if key suppliers fail?
• Does a specific outsourcing activity erode the organization's ability to be independent?

And, there are so many other things to consider as well.  The point is that supplier management should not be as simple as pushing the work load and responsibility to someone else.  Supplier management should be taken as a serious business process, which if performed incorrectly can cause irreparable damages to the organization, customer, and quite possibly the public.  It's the responsibility of every organization to not only control its internal processes, but those they chose to outsource as well. 

So, here's my recommendation.  Ask the above questions for every one of your suppliers.  Based on what you find, take action.  And be honest with the organization.  It's better to know how capable your value-stream is than to have an unhappy surprise.