Even Some Big Guys Need a Lesson in Vesting

When a manufacturer suffers recurring production delays due to parts shortages along its supply chain it’s a big problem. When this happens to a company like Boeing, which is trying to launch a major new product – the 787 Dreamliner – it reveals a costly and endemic problem that can verge on disaster.

Randy Tinseth, vice president marketing, Boeing Commercial Airplanes, in a blog post late last month stated, “A few of our partners are working through some spot shortages and are still incorporating engineering changes.” Aviation week magazine was a bit more harsh, saying Boeing’s supply chain is out of control.

It sounds like Boeing might be suffering from  Ailment 8, Driving Blind Disease, or the lack of a formal governance process to monitor the performance of the contracting relationship.

The 787 saga proves that even the big guys can profit from the lessons and rules of Vested Outsourcing in dealing and contracting with suppliers. It’s a good thing that giants like UPS and the Department of Energy are getting on board with Vested Outsourcing’s performance-based principles.

Boeing perhaps should pay attention to UPS’ Brad Mitchell, who recently advised Vested Outsourcing as a Top 5 Trend to watch: “The key is collaboration. It’s crucial that companies and their vendors, suppliers, and service providers work closely to establish appropriate goals based on business objectives and then create realistic and measurable supply chain outcomes that will advance mutual goals.”

Even mega-giants like the Department of Energy are singing the praises of performance-based thinking. I was pleased to get my new issue of Contract Management magazine and find the cover story sharing some of the recent successes the government has had in adopting performance-based approaches to recent contracts.

I especially like the one about how DOE wanted to “do things differently” in the way they contracted for the Rocky Flats Cleanup Project by providing incentives for the contractor to perform consistently within DOE’s goals. The department outlined the WHAT and turned to a supplier team of Kaiser Engineers and CH2M Hill that brought innovative approaches to clean up the DOE’s mess – which came in ahead of schedule and $530m under budget!

A good vested relationship with a collaborative governance structure works to anticipate the kinds of problems that Tinseth referred to, and provide better incentives and strategies to drive performance to achieve desired outcomes.

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