Nine tips OEMs can use to get the most out of suppliers

July 7, 2011
Nine tips OEMs can use to get the most out of suppliers

Authored by:
Tracey Long
Vice President of Marketing,
Baldor Electric Co.,
A member of the ABB Group
Fort Smith, Ark.
Edited by Stephen J. Mraz
[email protected]
Baldor Electric Co.

Working closely with original-equipment manufacturers (OEMs) is usually a critical part of any large supplier’s business no matter what industry it serves. And over the years, it has become clear that successful OEM’s share many of the same practices regardless of industry. While the following list certainly doesn’t include all the best practices, it does include the important ones, the ones that lead to success.

Promote open communication: Successful OEM’s communicate the direction of their business with their suppliers. They share company goals and provide sales forecasts. This makes suppliers better prepared to provide quality products when needed. An OEM that clearly defines expectations creates a stronger relationship. And if a supplier understands your needs, they can make every effort to meet them.

Understand industry trends: Tracking and understanding industry trends means an OEM anticipates customer needs and can make the changes necessary to deliver new supplies and equipment. Even better, when OEMs educate suppliers and share trend information, the supplier can often deliver a more-suitable product. An OEM can also differentiate itself from competitors by developing a reputation for anticipating customer needs and fulfilling them.

Understand how suppliers add value: Choosing suppliers that offer better products and well-respected brands adds tremendous value to an OEM. If an OEM is positioning itself as the premier manufacturer of equipment in its marketplace, it only makes sense to choose suppliers known for premium brands. Valued suppliers truly support the OEM in bringing value to end users.

Involve suppliers in the development process: OEMs that include suppliers in product development can make sure components have features customers need and want. By tapping into their engineering expertise and working together, the OEM has a better chance of coming up with a cost-effective product that addresses end-users’ concerns.

Choose suppliers that can customize products: Suppliers that can customize products to suit specific needs may be crucial for OEMs to win business. For example, a supplier that can build a motor or gearbox to a customer’s exact specification lets the OEM provide equipment better suited for an application. It might also reduce costs by eliminating unnecessary design features. Customized options can include mounting configuration, special paints and coatings, and specialized shaft extensions. Beyond customization, many OEMs also benefit from suppliers that offer more than one product, as well as preassembled packages.

Include the whole team: When selecting a supplier, top OEMs involve all levels of the business, including engineering, manufacturing, and purchasing, in the decision. Leading OEMs also team with suppliers’ manufacturing plants, working with their production teams to understand how they make products. Understanding each other’s manufacturing processes and tailoring specifications around them can often lead to substantial efficiencies and cost reductions. Taking this team approach at a variety of levels seems to create the most success.

Embrace electronic ordering: It’s all about making it easy to do business. Being electronically connected to suppliers improves productivity. It lets an OEM cross reference part numbers and check online for availability and order status. Electronic ordering also minimizes errors by eliminating manual transactions, saving time and money.

Work with suppliers that know logistics: Being able to get components and parts when they’re needed means using suppliers that understand the value of stocking inventory when customers need it. Quick access to parts means an OEM does not have to carry large inventories, a benefit that saves money. Successful OEMs use suppliers that develop cost-effective shipping programs.

Share the bad and the good: When things go wrong, it’s critical for OEMs to share this information with suppliers to discover the failure’s root cause. With this approach, suppliers and OEMs can work together to solve the problem. Both can learn from the experience and prevent the problem from recurring. Likewise, it’s important for OEMs to share successes with suppliers. Let them know when equipment is working well and customers are pleased. We all learn from positive news, plus, it deepens the supplier-OEM relationship.

© 2011 Penton Media, Inc.

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