The MPE Degree

Part 2: The Importance of Strategic Supply Chain Management – Cost Reduction Experience

In Part #1 of this series, we looked at how choosing an outsourcing partner with a sophisticated supply chain can speed the product development process and reduce your time-to-market. Now let’s understand the impact of selecting a strategic manufacturing partner with cost-reduction experience and the ability to scale can have on your business.

Part 2: The Importance of Strategic Supply Chain Management – Cost Reduction Experience

Cost Reduction Experience

A truly strategic manufacturing partner has extensive experience in taking the complexity out of supply chain management. Having established criteria for suppliers and aligning the business with specialized partners, that understand the design process and manufacturing environment, are of great importance. This provides a stable, comprehensive process with quality control measures throughout development and validation resulting in exceptional speed to market, overall lower costs, and price stability from prototyping to production.

While speed to market often drives early process and material selection, it is important that the design is supported by lower cost options as the product sales volume dictates. MPE uses a specific process/tooling matrix analysis that defines the point on the volume curve that will allow for an alternate, more cost efficient process to be used as the product gains market acceptance and volumes increase.

Case Study

Recently, two different medical OEMs reached the point where product volumes stabilized and there were no longer economies of scale to yield cost savings from the original manufacturing processes selected. Both products had over four years remaining in their life cycle so MPE was challenged to find ways to attain year-over-year savings.

In both cases, the initial tooling matrix developed during the product development process held the answers to potential cost savings. MPE fully understood the supply chain and the financial impact of making a change, so the OEMs were able to quickly calculate their ROI. In both cases, the OEMs realized savings greater than 15 percent upon implementation of the changes and achieved ROI payback in less than 12 months.

Ability To Scale

A strategic manufacturing partner can leverage your project spend as your business grows. With the understanding gained during the development of a product, a strong contract manufacturing partner can apply and extend the benefit of that experience to significantly reduce the development cycle on future projects. Brand integrity and use of common tools, materials and finishes as well as a thorough knowledge of your processes and requirements, ultimately saves time and money. The result is a product with a “family resemblance” that is familiar the end user.

Conclusion

It is not easy for most OEMs to give up control of tasks and responsibilities traditionally managed internally. However, when partnering with a truly sophisticated external design and manufacturing firm, an OEM will benefit from added value throughout the life cycle of a product. This comes, in part, from utilizing the strategic materials management plan, cost-reduction experience, and the ability to scale as your business evolves.

Read Part 1: The Importance of Strategic Supply Chain Management – Proven Materials Management

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