Better To Work With the Devil You Know

When does a critical supplier’s product become so unreliable that you have to fire them? What’s the impact to your business, your customers and your reputation?
Mattel, the toy maker, is facing that question. One of their largest suppliers, Early Light Industrial, shipped about 1.5 million toys that were painted with a lead-based paint. Early Light determined that a subcontractor “used a paint from an unapproved supplier”. The company is also a large supplier to other toy companies, such as Hasbro.
“The Mattel recall has left toy makers facing a difficult choice: break with one of the largest manufacturers or continue with the factory and hope another damaging incident won’t occur”.
“With smaller companies in the industry, foreign buyers can sever relationships more easily and turn to other factories.” In this case toy makers are “betting their reputations on adjustments in quality-control systems that they feel will catch any future harmful products”.
Think about the financial impact of changing suppliers. What will the new price be? Will the quality meet your standards? Most importantly: can the supplier meet your demand for product? As one executive put it, “It’s always better to work with the devil you know than the devil you don’t”.
The Lesson: Carefully consider that financial impact of firing a long-time supplier. Analyze if it’s possible to work with the supplier (and your staff) to fix the problem and continue the relationship.
Your Homework: Have you ended a relationship with a supplier and been worse off? Was there a long-term impact to that decision?
(Source: “Toy Makers Face Dilemma Over Supplier”, Wall Street Journal, 8/17/07)