Leadership Sometimes Means Saying No to a Good Thing

Supply chains are showing an increasingly worrying trend – companies opt to take short cuts rather than make themselves better, sometimes in spectacular fashion.

Last month BMW, Daimler and Volkswagen were raided by German authorities for colluding to buy steel – and this while the “German Big Three” are still negotiating with authorities for cheating on emissions tests. Other automotive manufacturers have had issues with their fuel efficiency numbers: Hyundai/Kia, Ford, Mitsubishi, General Motors, and more – while European manufacturers of diesel engines have requested a 70% greater allowance for emissions.

The problem of avoiding rather than overcoming challenges is not new, and not limited to compliance. Looking again at the automotive supply chain, the Takata airbag scandal shows how desperate car companies were to accept a few dollars of savings—most didn't question Takata's use of ammonium nitrate, an airbag propellant that was known to be inherently unstable, despite the company's inability to produce convincing test data.

Supply chain managers must play the role of linchpin to prevent these scandals. These events not only invite more (costly) scrutiny from government, they also destroy customer confidence, frequently leading to the creation of more compliance requirements. A “vicious circle” results because requirements testing and quality assurance reflect an “after-the-fact” approach that bakes-in the cost-benefit comparison of complying vs. getting caught. Supply chain managers sit in the ideal position to identify opportunities to create synergies between companies—and to preempt disincentives to good outcomes. Being a leader means sometimes saying no to something “too good to be true.”

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