Original Equipment Manufacturers (OEMs) are always looking for ways to reduce costs to be more competitive. Some of their strategies can be implemented by medium-size manufacturing companies. Who wouldn´t love to implement some of these cost cutting strategies to improve margins in their businesses? One of many strategies implemented by OEMs is known as Single-Source manufacturing.
Competition in the manufacturing industry continues to intensify. Manufacturing costs after COVID have increased exponentially. Const containment strategies are necessary for American manufacturing companies to compete effectively. The benefits of Single-source manufacturing can help reduce cost and increase margins.
Single-source manufacturing is a procurement strategy where one single supplier provides every necessary component for a given project of an OEM. This approach offers many benefits such as a shorter lead time, a streamlined supply chain, efficient operations, and improved quality control.
Here is a look at the benefits of Single-Source manufacturing.
Shorter Lead Time
Buying different components from different suppliers increases lead times. OEMs must work with products coming from different facilities located in different regions. Coordinating the arrival of all components at the same time is difficult and takes time. By having a single supplier produce a subassembly using the different required components, the OEM just works with only one supplier to secure what they need at the necessary time. With Singles-Source manufacturing, companies shorten the time from when they place and order to when that product reaches the assembly line.
Streamlined Supply Chain
Single-source manufacturing helps OEM simplify their supply chains by reducing the number of suppliers, optimizing transportation routes, reducing inventory levels and minimizing warehouse space. The result is more free cash flow for investment and better margins.
Efficient Operations
When manufacturers implement Single-Source manufacturing, they reduce the amount of suppliers they have to work with. The procurement process is simplified and procurement teams can focus more on quality and cost reduction. The different tasks necessary to manage material flows within the manufacturing plant are reduced as the number of SKUs in the warehouse are significantly less. By purchasing subassemblies from a single supplier, the OEM can simplify manufacturing operations and can focus on reducing assembly time and minimizing line stoppages.
More efficient operations result in competitive pricing and higher quality products for the end customer.
Improved Quality Control
Single-Source manufacturing provides manufacturing companies with opportunities to control quality standards better. That’s because auditing a single manufacturer that handles all components is easier to audit than auditing many. In addition, the supplier that is selected as a Single-Source manufacturer is responsible for ensuring the quality standards of the sub suppliers. Procurement specialists at OEMs have more time to select suppliers that can guarantee zero defects at the assembly line.
Often, medium size manufacturing companies buy components from different suppliers and have another supplier assemble them into a subassembly. It is common that when there is a quality problem, the quality control team of the OEM is unable to establish the root cause of the quality problem. A good Single- Source manufacturer generally manufactures some of the components in house and buys others. Consolidating operations under one roof, before sending the product to the assembly line reduces the probability of having quality problems.
Improved quality control helps manufacturing companies reduce overall production cost, improve reliability, and enhance customer satisfaction.
Single-Source Manufacturing Reduces Costs
Single-source manufacturing should reduce overall costs for medium size OEMs.
By working with one reputable supplier, medium size manufacturing companies can simplify the manufacturing process and increase margins.
A positive impact in lead time, supply chain, manufacturing operations and quality yields higher margin products at a reduced cost to the end consumer.
Servintec USA is Single Source Manufacturer
Servintec USA is a Single-Source Supplier. Servintec USA provides subassemblies and assemblies to reputable OEM in the USA and is certified IATF 16949 and ISO 1401.