For a long time, OEMs have faced the decision to fabricate its own parts or contract with a supplier. Previously, OEMs found it beneficial to keep a closed-loop manufacturing process. However, with the rise in competition and costs, most OEMs use outsourcing as a cost-effective option. The following are several of the main advantages that outsourcing offers.
Flexibility of Demand
With the ever-changing marketplace, maintaining an inventory of parts can be cost-prohibitive for an OEM. When an OEM outsources those parts to a flexible supplier, it can more readily react to demand changes to improve line balancing. For example, when demand rises, a reliable supplier with a consistent delivery rate can meet tight deadlines, reducing OEM costs.
Focus on Core Processes
By using suppliers, an OEM is able to outsource processes not central to its operations. The practice of contracting with an expert supplier offers many advantages. First, the OEM is relieved of purchasing capital equipment. Next, it reduces excess labor and training that workforce. Finally, it provides the peace of mind that the job is in the hands of experts in that specific manufacturing area.
As with inventory and labor, outsourcing parts puts the burden of keeping up with the latest technologies and processes on the supplier, not the OEM. Selecting a supplier that utilizes the most efficient equipment and technology offers high-quality parts while having a positive effect on an OEM’s bottom line.
Return on Capital Employed (ROCE)
With outsourcing, an OEM benefits from a better return on capital equipment because the capital requirements shift to the supplier. An expert supplier delivers efficiency and productivity, as well as increasing profitability.
While outsourcing OEM part fabrication provides advantages; an OEM needs to choose a supplier that meets its needs with a proven quality and dependability reputation. Since 1948, Bopp Busch has earned a reputation as a leading stamping supplier. We continue to work to meet our customers’ exact specifications and requirements while maintaining a safe workplace for our team. To learn more about Bopp Busch and our capabilities, contact us today.