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Partner with care.

Partnering is a new way of seeing the old manufacturer-vendor relationship. In a partnering relationship, an outside company takes over a function that was formerly the province of the main company. Partnering sees parent companies as mentors to its suppliers, maintaining an on-site presence to assure conformance to quality standards.

IBM, for instance, contracts with Baldrige Award-winning Solectron Corp. to build components for its PCs. Eastman Kodak has partnering agreements with IBM to handle its mainframe computer services, with Businessland to handle its PC procurements and with Digital Equipment to handle telecommunications tasks. World-class companies, such as Motorola and Xerox, insist that its vendors conduct Baldrige Award self-assessments if they are to continue as vendors of choice.

Your partner is more than just another vendor. The boundaries between your company and its blur. You have access to its books. You may provide training or on-site monitoring of its work. Price is no longer the only issue--so long as the partner delivers quality work on budget, you do not let bids out competitively. Greater efficiency for the big company ... greater security for the small company ... an end to the ancient supplier adversarialism ... plus higher quality for the end-customer. It sounds great. The practice is sanctioned by all the right authorities -- the Baldrige criteria, Peter Drucker, Tom Peters. But partner with care. Partnering is a slippery slope for manufacturing companies. Do it a little and you are OK. But go too far, and you risk losing everything.

Companies start by partnering off service functions -- secretarial pool, copying services, janitorial services and messenger services. Let your suppliers take care of these secondary tasks, you say, while you stick to your knitting.

But after a while, management gets the bright idea to partner off manufacturing functions that have been chronic losers. There are local fabricators and plastic shops that can do what your plants do, for about half what it is costing you now. And so, bit by bit, you let out some assembly, some subcomponent work, then some entire manufacturing processes. Your company downsizes, while your partner happily upsizes. But something has gone wrong. Your company was founded with the mission of meeting customer requirements in your industry. Now, you have to ask yourself if you are even in that industry any more. What is a paper products company that offsources timber cutting or paper-making? What is a steel company that no longer makes its own steel? What is a car company that enters into a strategic agreement to have its competitor make cars bearing its nameplate?

Partnering at this extreme is a white flag. It is the company confessing to the world that it is not what it once was, and that it has given up on competing in its most central, most mission-critical function -- making things. It erodes the company's reason for being in business. Partnering is a sign of what I call "manuphobia," the conviction many large American companies now have that they can no longer do the things that made them big in the first place.

Companies, after all, only have three essential tasks -- to create, make and market products or services for customers. Companies have been "partnering off" marketing functions for years to dealers, distributors, ad agencies, PR firms and research groups. Many companies have gone the additional step of buying other companies in order to short-circuit the process of product development. But the worst abdication of corporate responsibility is declaring that a "manufacturer" will no longer make its own products.

The point is not that companies should build walls around themselves and not offsource corporate tasks. The point is that great companies must eventually stand for something. A manufacturer that declines to manufacture is -- well, it is not much of: anything. It is what the Japanese poke fun at the lazy or fearful American company that has given up on what it used to do best, and taken up shuffling paper instead. You are just a dealmaker, clutching a handful of chits.

M.M. Stuckey is CEO of Minneapolis-based FOURTH SHIFT Corp. and the author of Demass: Transforming the Dinosaur Corporation, a book on corporate downsizing.
COPYRIGHT 1993 Institute of Industrial Engineers, Inc. (IIE)
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:partnering between manufacturers and vendors
Author:Stuckey, M.M.
Publication:Industrial Management
Date:Mar 1, 1993
Words:689
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