Careless outsourcing can become an extreme weakness for an original equipment manufacturer (OEM). Here are some common mistakes an OEM may commit while outsourcing.
Incomplete Definition of Essential Requirements
If you are outsourcing an assembly for your OEM product, be sure of what essential requirements any proposals must meet. Generate not only the terminal specifications, but also specifications of sub-parts. Do not leave the detailed design to the supplier—even if the supplier is a tried and trusted partner, the final detailed design must be approved by you. A proposal you accept should be above your minimum expectations.
Falling for the Lowest Quote
Everybody wants to reduce costs so that he or she can maximize the profit. Bidders know this weakness and want to quote low. But in this process a bidder may plan on lower quality of components and materials. When looking at the lowest or lower quotes, it can be beneficial to interview them to see how they can afford to go so low while maintaining quality of workmanship and materials.
Ignoring Track Records
If a certain offer otherwise meets your specifications and the cost quotation is low, you will certainly consider that. But these two are not the only parameters to check. Track record of the supplier and his reputation are important. Some factors to consider are: quality and reliability of equipment supplied by this bidder, number of satisfied customers and lengths of business relationship, adherence to delivery schedules, guarantee of after sales service for specified number of years, and spares stocking. Other customer reviews can be extremely helpful in these situations.
Undeserved Trust
In some situations where business is involved, people will hide weaknesses. Do verify the physical existence of the facilities whose presence is being claimed by the outsource agent. Visit or send a team to visit the manufacturing set up of the bidder to see if the machinery and team onsite is as good as claimed. Once a contract is made, and production starts, do ensure to be in touch with the production to ensure things are moving as planned. If an outsourced item is not delivered in time, delivery of the main equipment is also delayed.
Conclusion
In order to succeed as an OEM, one should consider the previous stated categories. When it comes to business, majority of the time you get out what you put into it. The more thorough you are with the process, the greater the end result will be.
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