The Manufacturing environment for the horizontally integrated organization is extremely competitive, which makes the need to focus on supplier performance an important venture. When keeping your costs low for your customer, you need to be certain that you are not sacrificing your reputation or your livelihood.
Quality typically varies with cost. If a supplier bids low, are they doing it to gain your business or is the quality of their offering inferior to others? Remember the Good, Fast, and Cheap model. There are instances where inferior grades of metal or hardware were supplied which later got vendors in trouble and wreaked havoc on the horizontally integrated company.
An organization who has to recall their product in order to rework it to specifications may end up taking a huge loss. On government contracts the repercussions can be immense (McDermott, 2010, FAA 2017). Lawsuits are expensive and the only entity profiting are the law firms.
Both organizations involved typically incur losses, and even the organization who is awarded compensation has no guarantee that the supplier has the funds to pay. Inferior products can even result in the loss of lives, driving liability through the roof (FAA, 2017)!
It becomes important, and many standards require, that traceability (from cradle to grave) is documented on everything that goes into a product. All materials, processes, and hardware should be traceable by the vendor who is supplying the product. Competition should be rated on quality first. Only then should cost or delivery become a determining factor.
McDermott, D. J. (2010) Inferior Metal Used on Navy Subs, The Day, Available online at: http://www.theday.com/article/20101020/NWS09/310209893
Titanic Universe (2017) Weak Rivets Might Have Caused the Titanic to Sink, Available online at: http://www.titanicuniverse.com/weak-rivets-might-have-caused-the-titanic-to-sink/1108
University of Missouri (1997) Testing Shows the Titanic Steel was Brittle, Available online at: https://www.sciencedaily.com/releases/1997/12/971227000141.htm
FAA (2017) Aircraft Materials, Processes, and Hardware, Chapter 5, Available online at: https://www.faa.gov/regulations_policies/handbooks_manuals/aircraft/amt_handbook/media/FAA-8083-30_Ch05.pdf