Overseas outsourcing is characterized as a cost-driven endeavor in which low prices drive every other factor out of consideration.
But at S & V Industries Inc., where our 21 employees provide
engineering and marketing services to companies seeking to out-source to India, we’ve learned that the strength of relationships
determines success more reliably than finding the lowest-cost
supplier.
Our philosophy has always been to find a single supplier for
a product line and stay with that company over the long term.
For example, all projects with North American companies
seeking to outsource iron castings to India would go to this
one supplier. Loyalty to suppliers has been an important
aspect of our business relationships — so important that
we’ve even turned down offers from other manufacturers
offering a lower price.
Originally, many people said that we were being noble at the
expense of profitability — that we were failing to capitalize
on an opportunity. Yet, we remained true to our core principle of investing in the relationship and building loyalty. In
turn, we saw several instances in which our approach produced greater financial rewards than if we had we moved our
business to the lowest-price provider.
For example, one of our larger customers had built its business with us to about $1 million a year and decided to bypass
us to work directly with our Indian partner. But when it tried
to line up a direct relationship, our supplier stood by us and
turned down the business.
We disregarded the counsel of advisers by not moving our
business to the low-cost provider of the day because it conflicted with our core values, but that decision has paid off
with real financial gains with ethical, loyalty-based relationships. We are not swayed by short-term appeals, and we are
not distracted by the constant change that occurs. Because if
the partnership is strong, you can overcome so many of the
difficulties of business.
SENTHIL KUMAR is CEO of S & V Industries Inc. (www.svindustries.com) and a member of the
Cleveland chapter of Entrepreneurs’ Organization (www.eonetwork.org), an international organization
of business owners dedicated to helping each other learn and grow.