Supply or not supply? That is the question for today.
When outsourcing to a custom manufacturer, a common question occurs, “Who Supplies Components When Outsourcing Production?” Do you supply your own parts and materials or is it more cost-effective for the custom manufacturer to purchase materials? We will address this topic from the perspective of a Wire Harness Manufacturer.
This is our continued series on Outsourcing Wire Harness Manufacturing. Below includes links to previous topics on this discussion:
What if I want to supply my own products such as wire, connectors and other components to save money?
Supplying your own products to a custom manufacturer offers several positives and negatives. It works best to communicate clearly with the manufacturer on the pros and cons of either option.
The question is do you really save money? One-size fits all does not apply here. There are many variables to consider which option makes the most sense (or more importantly – make the most CENTS).
Pros and Cons
Let’s take a look at the Pros and Cons of supplying your own parts and components:
Several benefits fall in your favor by taking the initiative to order and supply your own parts when outsourcing:
- You control the ordering process and supply chain.
- Ordering your own parts allows you to have full disclosure of pricing on the cost of goods.
- First-hand knowledge of availability or stock-outs on your product.
- Better control over delivery times.
- Negotiate your own discounts with the vendor.
Ordering or supplying your own parts may be welcomed by the manufacturer. On the other hand, this approach could be disruptive to the manufacturer. Here are a few negatives to consider:
- The time you spend ordering parts.
- The time you spend coordinating deliveries.
- Lost opportunity of volume discounts available to the manufacturer due to their purchasing power.
- Product knowledge and expertise that the manufacturer possesses.
- The variety of shipments arriving at manufacturer at different times throws off their production schedule for your product.
- The receiving department at the manufacturer must be informed of delivery. This communication is crucial for the manufacturer in order to properly schedule production of your products.
- The manufacturer must implement a means to monetize the receipt of your goods that you order. It is in neither parties interest to not account for labor, handling, and the overhead expense of receiving and storing goods.
An important question to ask yourself: Is your time better spent focusing on other areas of the business? Did you partner with a company that you trust enough to delegate the purchases to the custom manufacturer?
You partnered or hired the custom manufacturer due to their proficiency, expertise, and ability to deliver a quality product on time. Is it worth your time, hassle and energy to locate new vendors and product in areas that are either new to you or where you are lacking purchasing power and strong vendor relationships?