Many OEMs (Original Equipment Manufacturers) in the market today have run into this obstacle throughout the course of doing business. In essence, a custom designed part built by one specific manufacturer has become an integral part of your daily operation.
How can an OEM even begin to find cost saving opportunities when you’re handcuffed to one supplier? Believe it or not, the opportunity to go to market to find better pricing does exist, and these steps can help guide you along the way:
Step 1 - Create an NDA (non-disclosure agreement)Protecting your intellectual property, data and drawings is crucial! Prior to going to market it’s important to build an NDA that keeps your proprietary information confidential. Before engaging in discussions with any potential manufacturers or suppliers it’s important that this document is executed by both parties.
Step 2 – Communicate with internal engineers and employees in the fieldThis is an important step that procurement groups miss periodically. Internal engineers more often than not need to be involved whenever custom built materials are being sourced. Involving engineers early will also help expedite the internal approval process with any potential new supplier designs. In addition, this is also the perfect time to communicate directly with the field to see if any improvements to the incumbent design should be considered.
Step 3 – Do your researchThis is an incredibly important step that requires due diligence. Take your time when it comes to finding the right suppliers and manufacturers, and ensure they have the proper certifications and quality standards required by your organization. Once NDAs are locked in with potential candidates, use this time to interview potential new manufacturers.
Step 4 – Interview suppliers and learn about their capabilitiesWhen interviewing suppliers about their design offerings, don’t be afraid to learn how they may be able to service other categories within your organization. Even if this supplier doesn’t end up panning out for this unique sourcing initiative, additional opportunities may arise and understanding their value for future needs may benefit your organization down the line.
Step 5 – Submit RFP (Request for Proposal) to approved suppliersThis is where your research and hard work come to fruition. By this point you should be well versed when it comes to your incumbent and potential new supplier capabilities. Now is the time to craft an RFP with an in-depth questionnaire that will help drive decision making. While many of these questions will be built according to the unique design and needs of the custom part being requested, other general points such as lead-time, warranty and in-field service offerings should also be considered in the RFP.
Step 6 – Decision TimeScorecard each supplier’s response to your RFP by applying a set value to each quantitative and qualitative response given. Make sure this evaluation is performed by multiple people within your organization to help drive proper vetting and analysis. Once complete, see which supplier scores the best and begin the process of internal approval and contract execution.
Step 7 – Ensure complianceNo matter what decision you make from a supplier standpoint, it’s important to educate and train the field when it comes to implementation and execution. If this step is overlooked, any potential savings may be lost if the field fails to participate.
Keep in mind, much like any other sourcing initiative there are many variables and potential risks that could have a negative impact on this process. For example, stakeholders may be wary of changing suppliers of specialty engineered materials even when presented with lower cost savings.
If this ends up being the case don’t feel defeated, you can still utilize this newly discovered data from other manufacturers as leverage in negotiations with your incumbent supplier. In addition, this sourcing initiative also helped unlock a wealth of knowledge about other suppliers that may benefit your organization down the road.