The strategy will determine which consideration should be favoured above another. Some key considerations include:
Capabilities & Services
- Does the partner offer all the processes/services you need? Or do you need to use multiple suppliers?
- Explore and discuss what existing products this supplier makes. Do they have any similar products they make that reduce risk, but make sure it is not too similar where there could be a conflict of interests.
- Generally, it is best to make parts as simple as possible as this reduces cost. But this is not always possible, so do they have the technical ability and equipment to achieve this?
- Not all projects can start with high volume: the financial risk may be too great. But what happens after a year of sales, and the demand increases 20x? Moving suppliers is not easy or cheap and should not be considered lightly.
- It is always preferable to use a supplier that has a good level of scalability. But not all larger suppliers will be interested in batches of 50pcs for example, even if they are high value.
- Making components is just one part of the puzzle when it comes to making a product. How do you turn a box of bits into a saleable product? Some businesses have or set up their own assembly, in the long term this does tend to be the most cost effective when volumes or margins are high.
- There are many circumstances when setting up your own assembly team is not appropriate so does one of your suppliers offer this service?
- If they do, then it is beneficial for this supplier to be able to manufacture as many components as possible. This reduces procuring and logistical costs but also keeps a positive relationship with the partner as it allows them to make a little more margin per component. This extra margin particularly helps when there are challenges along the way.
Quality Assurance
- Most suppliers will have some level of QA/QC. The level of this is in part to the capability and services offered by the supplier.
- Typically, you would have an agreed level of inspection on parts, QC on sub-assemblies and the final product. Then a Minimum Assured Quality Level with the supplier where an external partner can check an agreed number of boxed products before the goods are shipped.
- The level of checking is then also dependent on your product’s requirement. Extra checking will usually incur extra cost so there should be a balance.
- Testing & inspection of parts is important for the repeatability of parts. The cost of assembling an entire product and then it does not work on final checks can be costly to diagnose the issue and rectify.
- If the product makes it to the end customer, then the cost is considerably higher, but worse is the possible impact on your reputation.
- Some products will need to meet stringent certifications. Can they guarantee parts to meet specific certifications every time?
- Location does not determine quality. The supplier and their processes do.
Location
- Manufacturing in different locations can have many positives. But there can be hurdles along the way.
- Language within a location can often be one of the main hurdles when communicating.
- Delivery, duty & exchange rates can bring additional challenges. Countries are continuously changing fees to import/export.
- Visiting suppliers is great for confidence. When they are close to home this is great but do consider visits abroad, possibly to the other side of the world.
- There is a cost and time associated with this. The development and normality of video calls has greatly reduced the requirement for site visits.
- Some countries and locations have lower overheads which can alter material/assembly cost considerably.
- Different countries work more or less days than the UK, this can reduce or increase timelines.
- Countries with more working days and lower overheads may have more staff and greater capacity to reduce timelines.
Cost
- There are many aspects that can impact part cost. Value for money is often a valuable metric.
- One example may be the part is 10% more but you have a 25% reduction in your time expenditure or lead time.
- Many parts require tooling prior to part production. This can initially be expensive, but it does open the door for significant part reductions.
- What is your anticipated order volume? Can we start without tooling to reduce risk and then quickly move to tooling to significantly reduce the product cost?
- There are very few products that consist of a single component, so when there are many components, who is assembling?
- A supplier may have slightly higher part cost, but they can assemble the entire product for you.
- Shipping parts to different suppliers for assembly can be an expensive task so the collective cost here is key.
- Due diligence should be carried out. Experience can be key when evaluating.
- Don’t always dismiss a supplier on the first cost you receive, have they understood your requirement correctly?
- Cheapest isn’t always best. Expensive doesn’t always mean better quality.
Communication & Relationship
- Keeping a good relationship with suppliers is critical. Manufacturing suppliers should be considered partners.
- We want them to be interested and invested in the project, this will ensure we get the best possible product.
- Communication can sometimes be a challenge with suppliers from around the world.
- Information often needs to be shared/explained in a different way, more visual. It is key to work with them to ensure efficient communication.
Time
- You want a supplier that can provide realistic timelines and work to them.
- You would want consistency with this too: there is not much benefit to parts being produced in 2 weeks and then the next in months.
- Occasionally it is good if a supplier can expedite parts for you. But you can’t push the limit as it can cause a breakdown in the relationship.
- Suppliers in different locations can deliver quicker results.
- Manufacturing partners with different areas of expertise commonly have lead times ranging from 2 weeks to 2 months.
Supply Chains & Logistics
- Different suppliers can offer different services. Often, they will have dedicated teams sourcing and procuring.
- Yes, it will be an additional cost, but it will reduce risk as this is their job to source and procure.
- Generally, the partners that can handle more of these elements will or could be your assembly partner.
- They will be used to procuring parts ‘just in time’ for assembly.
- When products become complicated ensuring stock is procured and available should not be considered lightly.
- You can do this yourself and then the parts are free issued, but you are responsible for the components being available for assembly.
- If they are not or not communicated well then there could be associated additional costs from the supplier.
Morals, Ethics & Politics
- While product designers try and steer clear of politics it is important to monitor the global environment.
- Different countries can have differing beliefs to ours. What is normal to them might be frowned upon within Europe.
- The world is a forever changing place where policies can impact prices, price variation should be expected.
- Sustainable manufacture or sourcing cannot be implemented overnight, so if this is important you need to find a supplier who is continually striving to improve their processes.