As OEM procurement departments develop strong supplier relationships they gain a solid understanding of the suppliers’ business, products and services, ultimately fostering a dependable partnership. In turn, this allows the supplier to better understand the OEMs’ needs and respond more effectively and efficiently. This fosters an increased economy of scale for both parties. Each organization is able to collaborate on product enhancements, new product development, managing inventories and exploring potential areas of consolidation.
The cost of components and managing the supply can represent a large portion of the final equipment costs. Mismanagement of the supply chain can spiral out of control by incurring higher product and production costs, inventory overruns and strangling cash flow.
Some key considerations in managing the sometimes hidden cost overruns of the supply chain are:
Supply Chain Efficiencies With Trusted Qualified Vendors
Up until the 1970s and ‘80s General Motors had dozens of autonomous manufacturing plants that did their own thing. Each plant had their own vendors and largely operated on their own schedules. Then in 1984, GM purchased Electronic Data Systems (EDS) in an effort to tie together cross functional operations and eliminate redundancies through more real-time data communication. EDS founder Ross Perot joined the GM board of directors and became GM’s largest individual stockholder while retaining control of EDS as chairman.