There is a persistent myth in the manufacturing industry that custom work only comes at premium prices, and that spreading out manufacturing duties among low-cost vendors is always the most cost-effective way to get the job done.
In reality, custom manufacturing and engineering processes can actually save companies money while delivering higher-quality output. No matter how complex the job is, custom manufacturing helps remove risk, ensure organization, and make the design and production processes more efficient.
Custom Manufacturing Streamlines Logistics to Avoid Delays
Time is money. The more production is delayed, the more it costs, and the less efficient the project is. When companies opt for component-by-component manufacturing using disparate suppliers instead of a turn-key solution, there is much more that can go wrong in the production schedule.
Communication and shipping logistics are a constant source of stress and risk because each provider is a crucial part of the supply chain. One hiccup anywhere along the line, and the whole project will be set back. These dependencies create the risk of cascading delays caused by missed deliveries or variations from the original specifications.
Turn-key custom manufacturing streamlines the supply chain and mitigates delays to help control production costs. Adapting to unexpected changes or challenges to keep a project on schedule is significantly easier when everything is made under the same roof.
Quality and Complexity Directly Affect Manufacturing Costs
Saving money on individual components by focusing solely on low prices often ends up being more expensive in total, due to redundancy and potential product design or engineering errors in the supply chain.
Discrepancies don’t just slow down production—they lead to low-quality output. Quality issues create substantial costs for manufacturers: delays and rework are just the tip of the iceberg compared to warranties, recalls, and lawsuits. Working with many suppliers increases a company’s exposure to these risks
Custom manufacturing supports cost-effectiveness of any project by delivering high-quality products and superior customer service. For example, the supplier will be equipped to provide replacements and spare parts at the proper specifications.
Custom manufacturers can be more agile and responsive in all parts of the design and manufacturing processes. As the requirements evolve over the course of a production run, an experienced custom provider can confidently adjust to changes. Every step is performed in the same facility, by consistently trained engineers who understand the holistic goal of the job.
At Custom Manufacturing and Engineering, we work hard to disprove the “custom costs more” myth by designing and manufacturing cost-effective, high-quality products. We love to design and build—contact us to learn more.
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.
If you’re like thousands of other OEMs, Key Tiers, and System Integrators, you probably have to deal with consistent quality control issues in parts of your key component supply chain. Your company worked hard to find the supplier that feels like the right fit, and now that you have one in place, it's hard to make a change. Why risk switching to a new provider if your current one is satisfying 95% of your manufacturing needs?
The reason is you're losing value in your supply chain and it’s negatively impacting your company. Just because you can live with a problem doesn’t mean you should. A supplier with quality issues is only doing part of the job you’re paying for, and the 5% of deliveries that aren't satisfactory can increase costs across your entire business. Repeat quality issues at delivery or defective components from your suppliers affect your output, scheduling, marketing, pricing, and eventually, your bottom line.
The True Cost of Low Quality
As an OEM, Tier or System Integrator, it is crucial to weigh the small potential risk and inconvenience of switching or upgrading suppliers against the significant risk of continuing to use unreliable components. In manufacturing, every single choice, purchase, design, schedule, and cost has major implications downstream. It’s important to be aware of your total cost of poor quality (CoPQ).
In all aspects of change in your business or even personal life, how many times do you say to yourself that you wished you had made “the change” earlier?
Defective or inadequate products or poor delivery performance from your current supplier can lead to major cost overruns. Repairs, redesigns, service calls, warranties, and other forms of waste are among the risks facing manufacturers when they decide that they can live with quality issues. Beyond these more easily measured costs are the intangible costs incurred from a damaged reputation, lost or dissatisfied customers, and time spent resolving issues.
Can You Afford the Status Quo?
Many manufacturing companies decide they can do business with the typical Cost of Poor Quality (CoPQ), which is between 5% to 30% of gross sales. Even though the CoPQ can ultimately add up to millions of dollars, many companies are intimidated by both the prospect of finding a supplier who can better satisfy their needs and the process of making a change to the new supplier.
Just because your supplier is able to fulfill custom manufacturing needs, doesn’t mean they’re the only one qualified to do so. While companies might assume switching suppliers is a risky maneuver, the larger risk is often staying with a supplier that is a substandard performer and/or delivering lower quality product than needed.
In addition to the risk of defects and low product quality, many companies live with poor customization options and other impediments. Related costs or limitations are built into new products because of the fear that switching to a new manufacturing partner will result in complications.
As Daniel Kahneman, the Nobel Prize-winning psychologist and author wrote, “For most people, the fear of losing $100 is more intense than the hope of gaining $150.” This is true in manufacturing—although on a larger scale—where the fear of minor costs related to changing suppliers can overshadow the opportunity to benefit from more reliable output.
Make Quality Integration a Priority With CME
We understand why most OEMs, Key Tiers, and System Integrators feel they can’t justify researching a new supplier and risking major setbacks by making a switch. They live with variations in quality because their business model is too risk-averse to consider a new supplier. Many companies have been burned before, and don’t feel comfortable taking the risk of switching providers again.
But you shouldn’t have to compromise and risk delaying your production schedule by working with an unreliable supplier. When quality issues occur, it’s you and your customers who will feel the impact.
Turn to Custom Manufacturing & Engineering Inc. (CME) for a reliable partner. With over 20 years of experience in design engineering, test, lean manufacturing and quality integration, we can help solve your most complex challenges quickly and cost-effectively—even when obsolete or hard-to-find items are required.
As John Ruskin said over a century ago, "Quality is never an accident, it is always the result of an intelligent effort." That's why rigorous testing is part of our culture at CME. Contact us to learn more about how we help our clients control costs and quality on every project.