When your supply chain is an iceberg

Now we come to learn that the root cause of the Titanic's sinking 96 years ago today was, of all things, poor supplier-quality management.

A recently published book details how the shipbuilding firm Harland and Wolff (still in existence today) in Belfast, Northern Ireland, resorted to using low-quality iron rivets in its rush to nearly-simultaneously launch the Titanic and two other "Olympic-class" super-liners (the three largest ships in the world at that time).

The narrative of how the shipyard's management team created its own supply-chain challenges - and then failed to address them - plays out like a modern-day supplier-network crisis. It also conjures up memories of how quality problems with a seemingly insignificant component on the Space Shuttle Challenger nearly put an end to the entire U.S. space-exploration program.

In proving their 10-year old theory that faulty rivets contributed to the Titanic's quick demise, the authors (who happen to be metallurgists) apparently conducted an extraordinary amount of archival, metallurgical and forensic research. According to a review of the researchers' findings in The New York Times "...troubles began when its ambitious building plans forced Harland and Wolff to reach beyond its usual suppliers of rivet iron and include smaller forges" with less experience in making higher-grade iron rivets.

The researchers found that not only did shipyard managers take risks with materials, but with labor as well. With a full-on effort underway to launch multiple large ships, Harland and Wolff management brought in less-skilled riveters to help finish the job ("good riveting took great skill," according to the Times article).

All these risks weren't taken without some serious hand-wringing. One of the authors of the book told the Times that shipyard management discussed the shortage of skilled riveters at every meeting for six months leading up to the Titanic's launch. How many times have we seen this scenario play out since the Titanic with other products and industries?

It all comes back to the issue of supplier discovery, due diligence and supply-chain risk assessment. Few companies - especially when faced with aggressive, high-stakes product launch schedules - ever invest in critical supplier-investigation activities. But these are the times when having unfiltered market intelligence about your existing or potential new suppliers is most important. Think about it: all the leading cost-, quality- and delivery-management software tools available today would never have revealed the true weaknesses in the Titanic's supply-chain.

Make the effort and investment to assess your supply-chain before it sinks you.

Big Blue Goes Red

A fairly important bit of supply-chain related news went largely unnoticed the other week. Tucked away inside the business section of most newspapers was an article saying that IBM had opened a supply-chain research center (its first) in Beijing. IBM claims it selected Beijing because of China's central role in the global supply chain for manufactured goods. IBM's move, of course, comes on the heels of a major, widely-publicized supply-chain disruptions emanating in China over the past several months.

IBM expects to serve its global customer base by offering centralized knowledge and software tools from its hub in Beijing. This outpost of IBM's supply-chain practice will help its existing clients track supplier performance by integrating data about their products' supply, demand, logistics and, presumably, quality.

We're excited to see that leading service firms are taking the concept of supply-chain intelligence to the next level, combining on-the-ground experiential knowledge, company-specific data and more widely available information. Still, much of Big Blue's focus with its new practice appears to be securing local clients, helping them get up the "supply chain maturity curve" and adding them to its current roster of 7,500 larger global clients. Makes us wonder who's interests they're truly planning to serve.

When we first heard this news, we were hoping to read more about IBM's efforts to promote transparency and visibility into offshore supply chains - certainly, IBM has the minds and resources to do this. This is, after all, what many leading global manufacturing firms are crying out for. In the Wall Street Journal article about IBM's announcement, IBM's supply-chain management director said: "[Foreign companies] want to see into the supplier's supplier's supply chains." Bravo.

Still, before any company can even think of peering more than a layer or two deep into its supply-chain, it better have a good grasp on what's happening with its own primary suppliers, whether the suppliers are down the street or across the ocean. Procurement managers better be sure that the suppliers they've already selected (or will soon select) are capable of meeting basic performance criteria, serving sophisticated overseas buyers and complying with generally-accepted standards of corporate social responsibility (CSR).

IBM is definitely headed in the right direction with the opening of its Beijing supply-chain research center. But for most companies that are sourcing overseas, the best first step would be to simply leverage all of the knowledge they already possess internally.

Doing so would tell you a lot more about your supply-chain than any big name consulting firm ever could - and it would cost your company a whole heck of a lot less. You already know more than you know.