Skiers shussing through powder often found the heat of their exertion fogged up their ski goggles. Welders wearing goggles on the assembly line had the same problem.
Chemists at Film Specialties Inc. in Belle Meade, New Jersey devised a protective coating that prevents fogging. The coating doesn’t wash off when the users clean the goggles, so they don’t have to reapply it like sunscreen. They also discovered this coating made the lens of the eyewear scratch resistant.† “Film Specialties was formed to exploit the unique technology for permanent anti-fog coatings,” says Walt Creasy, vice president.
Film Specialties developed one of the coating’s key ingredients, a detergent. However, the firm decided to outsource the production of this detergent to Richman Chemical, Inc. in Lower Gwynedd, Pennsylvania. “We are not set up for the synthesis of materials. It’s not our core business,” explains Creasy.
Outsourcing was an economic decision for Film Specialties. Creasy says outsourcing the manufacturer of raw products “allows us to focus on what we do best.” He says he doesn’t want to spend time “making the raw materials when we could be making the finished product.”
He believes outsourcing gives a small company the ability to create new products. “We don’t have to rely on materials that are already commercially available,” he explains. Instead, firms like his can be creative if they can find a supplier willing to custom manufacture what it needs.
Instead, the firm specified the manufacturing process and set all standards for Richman. Service level agreements (SLA) include the purity of the coating, the concentration of the active ingredients, and the moisture content. In addition, Film Specialties expects delivery in six weeks or less.
The Importance In Being Responsive
Film Specialties interviewed a dozen different companies before selecting Richman Chemical. He selected Richman because it was the most responsive supplier. When Creasy asked questions about the production of this new detergent, he says “Richman dug in and told us, ‘We’ll find out.'”
Creasy, who is responsible for managing the outsourcing relationship, says he maintains constant contact with his supplier. He finds his supplier “very responsive.” The two parties talk at least once every two weeks. His supplier provides him with a constant flow of information. This provides a comfort level for Creasy. “We want to know that they are on top of the production situation,” he says.
In addition, Richman has helped its business. It found a more stable container for the detergent which removed potential shipping problems. He explains detergents aren’t a safety issue even though they are classified a hazardous material. However, shipping difficulties can arise because of the haz-mat designation.
The two have decided disputes by discussion. “If they screw up, they must be willing to make it right. If we screw up, we have to be willing to pay the cost,” explains Creasy.
So far, the parties have been “reasonable.” This is a crucial trait, because Creasy says “a contract is only as good as the first dispute.” He refuses to deal with a vendor who will correct a problem, but then end the outsourcing relationship afterward because it doesn’t want to make any further corrections.
Forming a Partnership
Instead, he values this outsourcing relationship because he views it as a true “partnership.”
Lessons from the Outsourcing Primer:
- Outsourcing the manufacture of raw materials allows firms, especially small firms, to develop new products. They don’t have to rely on raw materials that are commercially available.
- Outsourcing vendors can help buyers improve their businesses. This vendor discovered a more stable shipping container for a hazardous material.
- Outsourcing vendors must be responsive. A constant flow of information gives a buyer a comfort level that the process is under control.
- Both partners must be reasonable in a dispute.