If you are an OEM, you already have great engineering and manufacturing; why would you go outside for anything? This blog lists three reasons that OEM’s should consider outsource.
1. Focus on what you do best
This is a question of focus. Your differentiation is your IP, that’s what customers pay you for. That is what you must do, and do well. But factory equipment is not just the interesting bits—there’s material handling, environmental controls, air & fluids handling, frames & skins, etc. Let’s call all that “other” stuff the platform. Sometimes there are also peripheral pieces of equipment or modules, like loaders, dryers, heating and cooling stations—things that are necessary for your product but not part of your differentiation. As an OEM, should you tie up your capital to develop, train and retain engineering & manufacturing resources and expertise for things like platforms and peripherals? Once you build such a team, can you keep them busy? Can you retain the best employees? More to the point, is a world-class platform team a strategic asset, or an expensive distraction? And if it’s not world class, are you giving up competitiveness?
Factory equipment design, even for platforms and peripheral equipment, is a specialized skill. If you need that skill, hire it only when you need it, for only as long as you need it, and focus your energies and resources on doing what you do best: making your IP ever more compelling.
2. Go faster with an expert
An in-house team may make sense for large OEMs with multiple product lines, to effectively leverage a platform team. For small or specialized companies, and especially startups; that doesn’t work so well. Do you only need to design a platform once, or your sales are sporadic (ex. build-to-order)? Maybe your customers demand sophisticated platforms (ex. semiconductor fabs) and you couldn’t acquire that expertise in any reasonable time, or cost, even if you wanted to. In such cases, leveraging outside resources is really the way to go.
3. Finding the right partner
As for supplier selection, trust is critical. As a knowledgeable OEM, you might be able to brut force a successful outcome without trust using a massive spec and stacks of legal documents. But a legal remedy after a poor outcome isn’t all that helpful. At the end of the day, the engineering team needs to have the depth and breadth of talent to ensure a successful design. The manufacturing team has to be adept at assembling and bringing up equipment that has never existed before, and doing so in a way that produces reliable, replicable equipment. The firm must mesh smoothly with your internal teams to ensure that both sides understand what each other needs, and can speak candidly about concerns, ideas and issues. The firm should be willing and able to act as a “trusted advisor”; working with you as a partner to select the best possible solution, whether or not it means a project for them today. These practices are what create trust.
A skilled design & build company with deep knowledge of your market will create the platform you need, even if it doesn’t look like what you originally asked for. They will carry you through, at a minimum, through pilot production and often even ongoing volume production depending on your cost and volume targets. Ideally, they should also be able and willing to help you transfer mature designs to an appropriate Contract Manufacturer (CM), when the time is right. Your supplier should act like part of your team; so the business model is one of partnership.
In our next blog, we will talk about Contract Manufacturers and what to be aware of when you use them. Follow us on LinkedIn for our next blog update. If you have questions or comments on the blog or have need for custom manufacturing equipment, feel free to contact us and one of our team members will be happy to help you through this process.