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.