OEMs can experience several advantages by sourcing their components from contract manufacturers. Domestic outsourcing offers OEMs the benefits provided by global outsourcing, but avoids the inherent disadvantages such as increased freight cost and long lead times. Not only can this process reduce cost in multiple areas, but it can promote an increase in revenue and improve the efficiency of an OEM’s in-house workflow.
Material Cost Reduction
Contract manufacturers often experience lower material cost, as either they operate closer to the source of the material, or simply purchase raw material on a larger scale. As the contract manufacturer’s customer base expands, their purchasing economy of scale increases, further lowering material cost for both parties. Additionally, the right contract manufacturer will have the ability and resources to customize the manufacturing process for each OEM, effectively optimizing material and labor efficiency and reducing the cost of production.
Increase in Capacity
Sourcing components from a contract manufacturer will free up machine time and internal workforce hours, allowing the OEM to take in more orders and focus valuable resources on the core competencies of their business.
Equipment Cost Reduction
As business and capacity increase, the requirement to purchase and maintain new equipment typically follows. By outsourcing certain phases of your production, this financial burden is placed on the contract manufacturer rather than the OEM.
Shorter Lead Times
Vendor Managed Inventory allows for consistent production of components that can be released whenever the need for them arises. This greatly reduces lead times introduced by in-house manufacturing.
A particular aspect of an OEM’s manufacturing process may not fall within their core competency. When this part of the process is outsourced, the OEM gains access to the contract manufacturer’s expertise. Naturally, this yields high quality components that are manufactured more quickly and efficiently, promoting an increase in risk management.
As the production of a component is outsourced, so is the OEM’s need to maintain the raw material inventory related to that part.
As an industry leader in the production of bronze components, we have helped countless OEMs cut costs, reduce lead times, and increase in-house production capacity. Our areas of expertise include bronze sleeve bushings, bearings, washers, tool and die components, and wear plates. Follow the link below to contact one of our experienced Sales Engineers, and learn more about how domestic outsourcing can help your company.