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Modular Outsourcing: Selecting the Right System Supplier

Published: John Willems

The decision to outsource production on a modular basis is one that needs considerable thought. You want to be sure the modules and machines adhere to the expected quality and functionality levels, especially when you choose to outsource the production of this product. Additionally, you expect timely delivery within agreed total costs. The KPI’s Quality, Logistics, Technology and Costs (QLTC) should be balanced. In this blog post, I will elaborate on the elements that are important when selecting the right system supplier.


A Positive Business Case is Important

To a great extent, the business case determines whether you choose to outsource production on a modular basis. In other words, is outsourcing profitable? And what partner should support you in this? You should consider integral cost – does the entire undertaking deliver the desired result?

It is smart to find this out quickly and thoroughly. This can be done in several ways. For example, MTA executes a quick ‘scan’ based on cost drivers of the product you are looking to outsource. In other words, we determine the cost price based on the cost drivers that contribute most significantly to total costs.  

Such scan gives you speedy insight. Relatively quickly, you know whether your plan is feasible. With that, you know whether outsourcing would be a good option. A system supplier who offers you a quick scan generally saves you a lot of time and money because your question is answered relatively quickly.

Other Factors also Determine Who is the Best System Supplier for Your Product

In case the business case is positive, a customized plan is the next step. Each product is unique and has certain characteristics. There is no plan that can be executed according to a predetermined format.

In this, Total Cost of Ownership is the starting point. When choosing the right system supplier, you consider other factors in addition to cost:

  • Quality: The integral cost price may be the lowest, but when quality does not suffice it will fail to yield the desired result in the end. Quality should be secured in the processes of the entire supply chain.
  • Flexibility: Is a supplier able to deliver the desired flexibility? How is this flexibility organized and managed?
  • Delivery Performance: How is this being measured throughout a longer period?
  • Production capacity: Is sufficient production capacity available? How does the system supplier deal with unpredictable demand?
  • Production infrastructure: Does the system supplier have the right production infrastructure in place, such as a cleanroom, ESD, testing devices and other technical expertise to be able to produce the module or system?
  • Communication: How are customers’ questions being processed and how is the communication regarding these questions organized?
  • Service: What does service at the system supplier in question encompass? Do they deliver spare parts? How does the company react when problems arise?
  • The system supplier’s customer base: How many customers does the system supplier cater to? And what portion of the system supplier’s revenue do these generate?

Honesty is the best policy

A partner that is honest and listens to your questions is by far the most important. You deserve a partner that honestly and openly answers all of your questions. Someone who is honest tells you the business case is negative.

Also choose for a partner that is willing to think together with you. For example, by turning a business case with a negative outcome into a positive business case. This may be done by optimizing the design through value engineering. Or by improving the manufacturability of a design without altering the overall design.

In case customization is desired, choose for a partner that can make this come true for you. Variation within the configuration can be made a reality by defining a smart architecture. This will result in a product that is configurable.

Is the system supplier you selected able to deliver this added value?

All the elements I described in this blog post are of importance when selecting the right system supplier that ensures the best cost price can be offered. Yet still, you can only find out your exact needs in a personal conversation. What does your personal business case look like? What challenges present themselves in this particular scenario?

Together with this system supplier you will have to determine how these challenges can be overcome.

Are you considering to outsource development and/or serial production of a machine and are you curious to hear the opinion of an expert? We are ready to help you.





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