It sounds like a paradox: how could a turn-key custom manufacturing solution cost less than soliciting competitive bids for each individual component?
Sometimes sole-sourcing is the only option to meet the unique needs of OEMs, Key Tiers, and System Integrators. The turn-key services and ready-to-use deliveries associated with sole-sourcing help save time and money on custom manufacturing projects—and more effective quality integration supports better end results.
Understanding the Costs of Managing Multiple Suppliers
When the requirements for a job are complex or require custom engineering, companies typically solicit bids from a large group of providers. Comparing bids to get the lowest price on each part appears to be the most cost-effective strategy. However, the long-term costs of managing multiple suppliers can easily outweigh any short-term savings.
Without a turn-key solution, companies are likely to face added costs from:
-Production overlap and redundancy: The more providers a company works with, the more inefficiencies are inevitable. Unnecessary redundancies can add substantial cost to custom manufacturing projects.
-Miscommunication and incompatibility: Working with multiple suppliers increases the chances of miscommunication—resulting in production of incompatible parts and leading to new costs or delays.
-Extra time spent coordinating with suppliers: With disparate low-cost providers, significant amount of time must be dedicated to coordinating between all the suppliers to keep production on schedule and resolve compatibility issues.
-Cost of poor quality: Quality integration is critical in custom engineering and manufacturing processes. Spreading supplier contracts across a large number of low-cost suppliers can expose a business to quality-related risks. The average cost of poor quality is estimated at 5-30% of gross sales—although manufacturing companies are often only aware of a fraction of the total cost.
How Sole-Sourcing Delivers Cost-Effective Results
Sole-sourcing can help deliver the agility and attention to detail that are hard to find when working with a large group of lowest-cost suppliers. Custom Manufacturing & Engineering Inc. (CME) provides competitive turn-key solutions for design, development, and manufacturing processes.
Separate suppliers might offer the lowest prices for individual components, but sole-sourcing can be a more cost-effective option overall because of the convenience and efficiency provided by a “one-stop-shopping” experience.
Imagine grocery shopping for ingredients for a large meal. You could hunt down the lowest price for each ingredient at individual shops all over town, or you could choose to purchase everything from one market. The time and cost of driving from store to store probably outweighs the savings from finding cheaper prices.
Even within the production timeline for a single product, it’s natural for requirements to evolve over the course of design, production planning, and manufacturing. With a large network of suppliers, changes are often difficult to communicate and implement in an efficient, timely manner—resulting in wasted time and resources. If your suppliers can’t accommodate new requirements, you could end up back at square one, searching for providers.
Sole-sourcing makes it easy to implement modifications to your product design or manufacturing processes. With one point of contact, communicating changes is easy—and you can be confident that your supplier understands how new specifications fit into the big picture.
Using a sole-source solution is an effective way to ensure consistency and attention to detail in your supply chain. CME can provide end-to-end quality integration for your custom design and manufacturing needs—mitigating delays, costs, and risks related to poor quality.
Find out how CME can apply the value of sole-sourcing to your next manufacturing or engineering project.