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Why Modular Outsourcing Improves the QLTC Performance

Published: John Willems

OEMs know that process management is all about monitoring processes in the supply chain. A minor specification change or a small adjustment to a process in the supply chain may impact the quality of the end product negatively, which is clearly undesirable. As a procurement manager, you wish to control this supply chain. You can oversee your own KPIs — but to what extent are they coordinated with other departments such as logistics, production, and R&D? Do you perform optimally in the areas of Quality, Logistics, Technology and Costs (QLTC)?

Separate islandS or a single coherent whole?

To increase the profitability of your organization, it is important to ensure the closely related QLTC criteria are balanced. It goes without saying that your (customer) performance depends on these criteria:

  • Does the product meet the required specifications?
  • Is the product delivered on time?
  • Is there a smart product architecture — and are they linked to the right (production) technologies — to achieve the lowest total costs?
  • Can you sell the product at the desired profit margin?

In case the balance between these criteria is suboptimal, it affects quality, costs, lead times, etc. You can only control so many parameters as a procurement manager, and this applies to your colleagues as well. Is there an optimally coordinated process?

In our experience, Purchasing, Logistics, Production, and R&D often operate as separate islands; connecting these departments is difficult. As a result, you fail to perform optimally on QLTC. Enhancing this connection creates opportunities to improve quality and decrease lead times and costs.

(Modular) outsourcing of a mechatronic module or system may be a suitable solution in case you are currently dealing with these difficulties — I will explain why.

The added value of outsourcing your manufacturing

It is easy to lose sight of the optimal balance between costs, logistics, technology and quality due to day-to-day issues, the complexity of processes or the size of your company. A production partner, however, prioritizes this balance. It is a production partner's goal to produce your module or system as efficiently as possible, while realizing minimal total costs.

This is the reason why a valuable production partner can optimize the supply chain of purchasing, logistics, and production — the entire production process — taking into account all involved stakeholders. R&D can also be a part of this supply chain if there are opportunities for value engineering or optimizing the product architecture.

You can employ the R&D department of your production partner when outsourcing starts in the development phase. The added value of applying this form of Early Supplier Involvement (ESI) translates into a design that links functionality and manufacturability. 

However, to achieve the desired result, clear agreements should be made. What’s the framework you and your production partner operate in? What does your cooperation look like? Which objectives should be attained? In other words: how do you achieve the best result through collaboration?

A production partner will help you create a more robust supply chain, resulting in a more solid and flexible supply chain that is able to deal with fluctuations. Your partner will ensure you perform optimally in the areas of Quality, Logistics, Technology, and Costs.

In case you would like to discover if outsourcing contributes to increasing the profitability of your company and achieving your growth ambition, we have an interesting tool for you. We have developed an outsourcing scan that determines the degree of cost-effectiveness of outsourcing for your business. Answer 14 short questions and find out whether this may be the right strategy for you! 

Take the Scan here:

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