Peach Inc. is a manufacturer of consumer electronic devices, including computers, tablets, and phones. Peach has earned a reputation of providing reliable high-quality products at affordable prices. The company has also earned a reputation of being a good corporate citizen with many environmental and social initiatives. For example, the company uses far more recycled materials in its products than any of its competitors. The company is also known for its charity work with educational institutions.
In an effort to control costs, Peach outsources manufacturing of its hardware to many Overseas factories; however, it closely monitors each facility to make sure quality is maintained. Tom Peach, the company CEO, was recently approached by Young: Inc., a company that asserts it can significantly reduce Peach’s manufacturing costs by overseeing Peach’s manufacturing. Young will find factories that it claims can maintain the same level of quality at lower costs. In addition, Young will do all the monitoring so that Peach can save the costs of monitoring and auditing the manufacturing facilities.
Jorge Workman, Peach’s director of accounting, became quite concerned when he learned of the potential deal with Young. Jorge immediately went to Tom with his concerns. In particular, Jorge did not want to turn over the responsibility of monitoring the facilities to another company. Tom, however, feels that the quality control testing done locally is enough to assure that quality can be maintained, and the cost savings are very important to the company’s efforts to keep its prices affordable. In addition, Tom felt that under this arrangement, anything that might go wrong at one of the facilities would be Young’s responsibility and not the responsibility of Peach.
Jorge was still not convinced. He knew how labor problems in the supply chain of Nike in the 1990s had caused significant reputational and financial damage to Nike, and he did not want to risk the same thing happening to Peach.
What do you think Peach should do?