QAD selects supplier based on quality, global capability

By Susan Avery -- Purchasing, 10/19/2000

Making a decision to outsource is not one companies take lightly. Just ask Larry Buker. As corporate purchasing manager for QAD Inc., Buker was involved in the software company's recent evaluation of an earlier decision to outsource its print-on-demand center, as well as the subsequent supplier-evaluation process and selection decision.

While not generally considered a software company's core competency, capability to produce quality training documents and marketing materials can be critical to its success. For a software company, "production" is software development. The print-on-demand center is where product fulfillment takes place.

Based in Carpinteria, Calif., QAD is a global provider of industry-specific e-business software and services. Its products are available in 26 different languages, in 86 countries. The company outsources its print-on-demand center to Danka Services International, an outsourcing company located in Rochester, N.Y. A division of Danka Business Systems, DSI provides a range of services for making, storing, retrieving, distributing and utilizing documents on- or off-site.

At QAD's print-on-demand center, DSI, which is located on-site at corporate headquarters in California, produces all of the printed documents that go with the company's software, training materials, and some marketing literature using both offset and digital printing. It also does the company's business-card printing and CD duplication.

Still, at the end of its initial five-year agreement with DSI (which had been extended several times throughout management change at QAD), the software company decided to evaluate its decision to outsource its print-on-demand center, and issue an RFP (request for proposal) to the supplier community.

Buker, who has 17 years of experience in purchasing and a C.P.M., had been working at QAD for about six months as a senior buyer when the company's legal department alerted him that the agreement was nearing its end. "When I started at QAD, purchasing was mainly a tactical function," says Buker. "Our legal department, however, saw the value of early purchasing involvement (in relation to the company's strategic goals)." In addition to managing the agreement for QAD's print-on-demand requirements, Buker has responsibility for the company's IS-related procurement (information systems).

As a representative of purchasing, Buker was on a cross-functional team that reviewed the outsourcing decision, leading it through the supplier-evaluation and selection process. "We were considering taking the print-on-demand center in-house," says Buker. "As such, we would buy the equipment, manage the process, staff the operation. We wanted to ensure quality levels were to our standard. We wanted to control the process." In addition to purchasing, the team consisted of representatives of the company's knowledge engineering group (technical), product fulfillment and legal department.

Deciding that printing documentation was not one of the company's core competencies, the team sent the RFP to four suppliers (two manufacturers and two distributors-one of which was DSI). Foremost on the team's list of supplier-selection criteria was capability "to print and distribute worldwide." Says Buker: "This is the future for us." QAD had been printing everything in the U.S., then shipping documentation to users who are located overseas, increasing its freight costs.

The team also was looking for quality capability, as well as ISO 9000 certification, the international quality standard. "Quality is very important to us," says Buker. "Training materials cannot have errors."

One specific quality issue that had concerned the team: Resolution of screen prints in training materials affects how customers relate to what's being shown on their computer screen. Until the time the team evaluated the outsourcing decision, "quality was okay," says Buker, adding that eventually the company began looking for higher print dpi (dots per inch) and better resolution. "At the time we were evaluating suppliers, we didn't know what DSI could do."

Other criteria the team evaluated include: competitive pricing, good rapport with supplier management, and responsiveness to the company's needs.

Once the suppliers responded to the RFP, visited QAD and presented overviews of their capabilities, the cross-functional team narrowed down their list to two companies: one of the manufacturers and DSI. "The other distributor was very creative, had a competitive price, but no real worldwide capability. To service customers overseas, they used a network of distributors."

The supplier-evaluation process took several months, during which product-information managers traveled overseas to further evaluate supplier capability there. Eventually, the team selected DSI, based on QAD's previous relationship with the supplier. Buker says the decision came down to the supplier's "knowledge of QAD's operations, plus its ability to meet our new requirements (global capability and higher quality standards). A decision to open a mirror print-on-demand operation in Limerick, Ireland, was due in part to the fact that IBM is a big customer of DSI and the supplier had personnel located there to service the computer giant.

"DSI knows our business cycles," says Buker. "We have a hectic schedule at the end of every quarter and they are aware of this, as well as the timing of our two users conferences. One which takes place in the U.S., the other in Europe."

At these times, DSI adjusts employee work schedules so that they are printing materials from 8 a.m. to 8 p.m. the three weeks before the end of the quarter, says Buker. "They are very responsive to our needs. And, they are reliable. They have been with us through our ups and downs."

One risk of outsourcing involves IS0 certification. "Our customers demand that we be ISO-certified," says Buker. There may be risk involved if the supplier doesn't do the things necessary to stay compliant. Another risk: dedication to QAD. If the supplier puts aside one of our orders to fill one for another customer."

Purchasing measures supplier performance on a regular basis. An important metric is quality (including accuracy) as well as ISO 9000 certification. "Since DSI is on-site, we meet with them on an ongoing basis to address any issues that may crop up," says Buker. "We hold formal meetings monthly."

It's important to QAD that suppliers be competitive within their markets. "We asked DSI to be innovative at cost reduction," says Buker. "and they've been very proactive. Take CD production, for example. We had been doing this ourselves. DSI told us that they could produce the CDs for us cheaper, better and faster. They showed us how they could produce the CD covers and packaging with digital MFPs (multifunction products) instead of offset printing. We had been paying $4.50 per CD for the jewel case and cover with QAD logo and accompanying literature. Now, DSI is doing this for us at a cost of $3.75 per cover." QAD produces some 2,000 to 4,000 CDs per month.