I was working with a fast-growing high-technology company–100% per year revenue growth. When I joined the company, we were at $100 million in revenue. That grew to $200 million and then $400 million. It was a rocket ship.
Remember: The best process in the world can’t add value if it is subverted.
Our CEO instilled in us that our vendors were our partners, not merely suppliers. We were to treat them as employees or family. Our growth taxed our suppliers to keep up with us. We needed them to keep up.
A whole new team of purchasing folks came on board. How do purchasing folks get evaluated? Cost savings against current standard costs of items they purchase and on-time delivery of their suppliers.
The buyers decided to go out and get bids to see if they could save money on all the internally-designed mechanical hardware that we purchased. Purchasing requested prints from document control to send to new suppliers to get quotes. I recall the document control manager was furious at needing to make 5 sets of prints of all these parts. Low and behold, purchasing found suppliers that could offer cost savings so they placed the orders with different suppliers.
Not too long after, things started falling apart. All of a sudden, parts that had fit together well for years didn’t. We couldn’t build any product with the parts from the new suppliers. Why was this?
It turned out, our mechanical engineers had given the traditional suppliers building products red-lined prints–mark-ups–that instructed them to make significant engineering changes to the design. The quality control organization also had red-lined mark-ups from the mechanical engineering department. Because the suppliers had a solid track record, quality control didn’t really inspect the parts to ensure conformity to the red-lined drawings. They passed them on to raw materials inventory.
It was only when the parts were issued against work orders to the shop floor that the problems surfaced. The shop floor couldn’t build anything with the parts provided by the new suppliers–nothing fit together.
The mechanical engineers were not too soon thereafter summoned to the shop floor. They had no idea what the problem was. A 5-alarm fire was brewing. The mechanical engineers cried foul when they learned what had actually happened.
The parts were built to bad drawings, drawings that they had never updated via the Engineering Change Order process. They said, “Purchasing can’t do that!” Well, the mechanical engineers caused the problem, not purchasing. And, it nearly cost us a fiscal quarter’s worth of revenue.
There are so many things wrong about this. But, the problems really stemmed from mechanical engineering not using the Engineering Change Order process and for quality control allowing them to get away with it.
What’s the lesson here? The best process in the world can’t deliver value if it is subverted.
Thought for the week:
“Three things a leader or manager should be thinking: What’s happening? What’s not happening? What can I do to influence the outcome?” – John Baldoni