Team Building Reduces Costs for Suppliers and OEMs

Team Building Reduces Costs for Suppliers and OEMs

When watching sports, we see the action play out, watch the scores go up and down and at the end of the day, at least when it comes to sports… there’s winners and losers.

For suppliers and OEMs, who are trying to move forward to work as a team…It doesn’t have to be that way!

End consumers need OEMs (original equipment manufacturers) to offer lower priced, but still excellent quality, products. At first… there is nothing new here… suppliers need to offer reduced part costs or those parts need to be made more efficiently so they simply cost less – or both.

While those points are true, another area of consideration might offer additional cost savings. It’s in the extra non-value-added rhetoric that wastes time and thus increases the cost – for both suppliers and OEMs. This is the almost endless back and forth commotion over how parts are made, what standards and setup times should be used and how to determine other manufacturing details. Funny thing here… an agreement is finally made between suppliers and OEM.

Some Critical Questions:

Has this agreed-upon information been recorded for the next estimating session and part negotiation?
Will the supplier and OEM experience that same re-invent the rhetoric wheel – again?”
When determining drilling time, for example, how many times must it be agreed that it only takes 7 seconds to drill a ¼” diameter hole through a ¼” plate (of 304 stainless steel) using a Mazak Nexus 410 (with a high speed cutting tool)?

OEM service initially try to identify suppliers who will offer lower pricing, but increasingly, try to find suppliers who will maintain consistent lower pricing – especially when the OEM requests a feature change. Frequently, the price may dramatically increase, appearing unjustified. Since the OEM has already selected the supplier the rhetoric continues where both the supplier and the OEM experience unnecessary costs.

What can a supplier do to reduce these costs?

Suppliers can invest in cost estimating software and higher technologically advanced work centers. Software can provide a central storage of this agreed upon information and can help reduce rhetoric by using a consistent reporting tool during negotiations. Result: OEMs get answers needed to quickly make purchase decisions. Suppliers can quote more and focus on making more parts.

What can OEMs do to help reduce these costs?

OEMs can help their suppliers invest in cost estimating software and better technology work centers. Offer information and conduct studies to help identify how parts can be made for less cost. Result: In addition to the software benefits listed above, any manufacturing supplier with better machining or fabricating work centers, for example, can produce better parts, faster and at a lower cost.

It’s a simple team based approach for manufacturing.

U.S. Suppliers are a critical component for our manufacturing economy and in making quality parts for consumers. OEMs and consumers need lower pricing from U.S. manufacturers to maintain purchases. By suppliers and OEMs working together, our country can fend off foreign competition. If more OEMs utilize these software tools and were more receptive to offering their suppliers these resources, the overall supplier negotiations could be smoother, less costly, and with an end goal of a win-win for all.

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