Weingarth: It actually goes both directions, because they need to see the orders, they need to see our forecast, and they need to understand what we're doing as a company as well. Because, at the end of the day, this all becomes a parts game: Can you get the parts in at the right timeframe? Certainly the contract manufactures can build the product — that's not the issue. The issue is making sure all the parts are there at the right time. So the other thing we do is to have a formal monthly forecasting meeting with Flextronics to release to them what we call the total demand report, which is a 12-month rolling forecast.
S&DCE: Do you have links between the forecasting systems on both sides, or is it just handled in the manual process?
Weingarth: Semi-manual, let's say. We send to Flextronics, through e-mail, a spreadsheet that has all the information on it, and then they load that into their manufacturing resource planning (MRP) system. Which, by the way, is another advantage; I don't have to pay for an MRP system.
S&DCE: Finally, what do you view as the keys to a successful relationship with a business process outsourcing partner?
Weingarth: First and foremost, mutual respect and a partnership are very important, understanding that this is not a "we're the customer, you're the supplier" relationship, but a partnership. We see ways to gain from this partnership, and obviously Flextronics sees ways to gain. That is important right out of the chute. Being honest, open and trusting each other are also very important. Of course, that builds overtime, but certainly that was part of the core fundamentals of the relationship.
It's also important to establish relationships at all levels, starting with our CEO, through myself, and all the way down into the organization at multiple levels within Flextronics. I also can't stress enough in a global market and a global supply chain how crucial is communication. Just because you don't hear anything doesn't mean that everything's going well. I've been in this business for 30 years, and sometimes no news is not necessarily good news. That's one reason we do site audits. I make sure that I personally go at least twice a year to Asia, as well as down to Guadalajara, to actually have face-to-face meetings with people there. And that's just not me; my whole team is constantly engaged in face-to-face communications with Flextronics.
When you establish those kinds of relationships and those kinds of communication patterns, people are honest, they understand that you won't overreact, that you'll you listen and say, "Okay, how do we fix this, how do we improve that." And that's the cornerstone to everything, that kind of relentless commitment to continuous process improvement. Because everybody starts somewhere, and the key is to ask how we get better, how we improve our yield a little bit, how we get a little more cost reduction, how we get more efficient, how we reduce time. Constantly looking for the next level is very, very important.
The one piece of advice I would give everybody when it comes to this type of relationship is that just because it's being outsourced doesn't absolve you of the responsibility. I think a lot of people make that mistake, thinking, "Well, it's outsourced, they can handle it." No. You've got to be in tune, you've got to have the measurements, you've got to understand who owns what, and you've got to have control points and staff restraint and escalation patterns. It really all comes down to good project management, good communication, setting the tone and the strategy upfront, and then constantly measuring it.
SIDEBAR: When Outsourcing Doesn't Compute
By Geary Barnes
In the cost-cutting, margin-tightening world of petrochemicals, outsourcing is an all-too-common approach to business. Maybe. When faced with this decision in its freight payment system, however, Chevron Phillips Chemical Co. LP (Chevron Phillips Chemical) found that the cost savings predicted just didn't compute.
Chevron Phillips Chemical manages its freight payables via a corporate integrated SAP platform that automates the accrual and payment of its outbound freight invoices.
Offering services that could provide greater reporting capabilities and potentially save the company thousands of dollars in processing costs, multiple third-party freight payment companies contacted Chevron Phillips Chemical. Each touted the cost savings of outsourcing the freight payment system through detailed cost-benefit analyses.