Why OEMs Should Consider Outsourcing A Level Up the Bill of Material

By Scott Anderson on 31 July, 2019

liberty-electronics

The Bill of Material is a critical component of the planning process in manufacturing for any industry. This comprehensive list of components and equipment required to manufacture a product can fluctuate depending on cost, availability, and capacity. For original equipment manufacturers (OEMs), outsourcing a level up the Bill of Materials might prove to be beneficial.

For example, by partnering up with the right contract manufacturer (CM), you might be able to outsource both the cable and harness assemblies and the assemblies themselves. There are a number of advantages for outsourcing at the next level up in assembly. 

Increase Capacity

If you need to increase your final assembly, integration, or test capacity, you can immediately increase your capacity by moving the subassembly work to a qualified CM and free up internal personnel to take on this extra workload. Departments such as Planning, Procurement, and Quality can also free up capacity when they only have to manage a few upper-level assemblies rather than a high volume of lower-level assemblies. 

Achieve Cost Reductions

Lean CMs often have a lower labor sell rate than the fully burdened hourly labor rate of an OEM. Additionally, a CM can optimize the value stream and sometimes reduce the total required manufacturing hours. By switching upper-level assembly work to a trusted CM, you can take advantage of a reduction in hours plus the lower rate structure, particularly for that overhead personnel needed for production support. 

Realize Lead Time and Inventory Reductions

By building to your forecast, CMs can anticipate your needs and stock long lead time components and assemblies. By working with CMs that support Pull Systems and Vendor Managed Inventory Systems (VMI) both with or without third-party logistics providers (3PLs), you can experience further improvements in material availability while reducing lead times and inventory dramatically.

Exploit Improved Designs

When you collaborate with the right CM early enough in the life cycle of a project, they can provide their specialized input on component selections in order to not only reduce cost and lead times but also improve reliability. This level of optimization can continue to drive overall product and process improvement. For example, CMs that have the capability to produce CAD solid models and 3D-printed models can provide faster, less expensive mock-ups that allow for the opportunity to evaluate multiple different design concepts.

It’s important to remember that none of these benefits are possible unless the CM you partner with has a robust and efficient configuration management system in place. Knowing the impact of proposed changes to cost, schedule, stock, work-in-progress and finished goods is critical for effective implementation.  

To speak with a contract manufacturing expert on how to efficiently and effectively outsource a level up the Bill of Material, contact Liberty Electronics today.

Topics: Manufacturing, Outsourcing, OEMs

Author: Scott Anderson

Mr. Anderson joined Liberty Electronics as Manager of Engineering in July of 1999. In 2010 he was appointed Director of Business Development. He previously worked as a project engineer at Pratt and Whitney Aircraft and at Joy Mining Machinery. At Joy, Scott went on to manage international projects including quality improvement initiatives, computer system implementations, and new product development programs.
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