One of the main attributes of OEM’s is that they regularly surpass the performance of typical outsourcing providers. With companies making increasing use of outsourcing to improve financial performance, overcoming the challenges of working with outsourcers, and erratic support capabilities is a key critical success factor. Indeed when considering outsourcing activities, especially manufacturing tasks OEM’s must continuously consider customer needs and the effect of product introductions which can be difficult to translate for 3rd parties.
In developing capabilities that meet the agility and response requirements— business processes that help organizations successfully control changes whilst providing the adequate supply chain visibility within their outsourcing activity—is the answer.
It could be argued that OEMs are the only ones with significant visibility of their total supply chain and are thus able to ensure its smooth operation. Replicating this with an outsourcing solution can be an overwhelming activity with complex issues such as the sheer volume of parts that need to be coordinated. Where the demand profile is erratic (with significant peaks and troughs) this can further influence results with issues such as neglected shipments, excess inventory (to buffer service levels), little factory production and increased cost of materials
Developing response management processes that offer visibility throughout the complete supplier network, providing manufacturers tools to foresee problems and carry out real-time scenario based (what if) reviews and be more engaged with the supply chain and the organizations requirements. This can help eradicate the many challenges faced with outsourcing enabling OEM’s to:
* Monitor inventory through close attention to lead times and changing demand.
* Make sure there is ample, well-timed material coverage within supplier network that encourages a reactive organization that can quickly respond to issues
* Enhance the management of product lifecycles through better collaboration and scenario based evaluation
* Better deploy cost reduction activities through introducing lower-priced materials by correctly monitoring and live stores data and planned production.
The key challenge remains that any outsourcing activity that includes supply chain requires close system based collaboration that provides appropriate visibility. Where needs are evolving (which is typically the case with New Product Introduction) – organizations must ensure a degree of agility and responsiveness is embedded within the outsourcer. This requires the development and management of key business processes coupled with a suitable (and trusting) relationship with the OEM.