PEKO Precision Products

4 Reasons Why Purchasers Love buying From Turnkey Contract Manufacturers

Posted by Brianna Marchetti on Dec 20, 2018 12:32:49 PM

There's Benefits in Purchasing Higher Level Assemblies 

Purchasing managers and their counterparts have days filled with tedious activities which include supplier evaluations, plant visits, contract negotiation, Engineering fiascoes, all while maintaining database records.  The more suppliers and parts that a purchasing department is managing leads to a more cumbersome workload with endless tasks that need to be accomplished.

6 medium sized machines during the end stages of productionThankfully, choosing a Turnkey Production Partner, or Full-Service Contract Manufacturer, can prove to be the magic solution for purchasers overwhelmed with endless task lists.  Purchasing complete assemblies and sub-assemblies from a Full-Service Contract Manufacturer with an extensive list of in-house capabilities can save time, resources, money and headaches for a company's purchasing group.

 

 

1. Simplified Purchase orders

Creating and managing POs for each individualized item, or groups of items, in a BOM can be expensive and difficult 3 electrical wiring builds  to be used in machinesto manage.  Not only does this become a tedious job, but it can take multiple days just to issue all of these POs while the risk of error increases with each additional PO for a single project.  By outsourcing an entire High-Level Assembly to a Contract Manufacturer, managing just one PO can significantly reduce the amount of stress on the purchasing department for a project.  Overall, buyers and purchasers are finding that by using a Turnkey Production Partner, they can issue a single PO for an entire unit using one company and quickly move on to managing other projects. 

2. Reduced Management of Sub-Suppliers

As stated in the previous section, managing  a large amount of suppliers from an even greater number of BOM parts is extremely time consuming.  When you choose a Contract Manufacturer with a breadth of capabilities, this can easily be mitigated.  Contract Manufacturers manage all parts within their own capabilities, and then manages their own supply base of sub-tier suppliers for secondary ops.  Built into the CM's overhead, the company can manage everything within the project's supply chain so that the OEM customer does not have to be burdened with a tedious workload. 

3. Reduced Supply Base 

Having been in the industry for decades, PEKO has seen plenty of OEMs that are trying to significantly reduce their supply base.  Many OEMs have ended up with a database full of suppliers which is costly to maintain due to audits and other correspondence.  This management is usually handed over to the purchasing department to greatly reduce the number of suppliers in database so that only the best and most capable will be used in the future. The easiest way for a company's purchasing group to reduce the number of suppliers in their database is to choose a High-Level Contract Manufacturer with a Vertical Integration approach. 

For example:  When an OEM chooses a company like PEKO to be their Contract Manufacturer, we provide our customers with:8 welded assembly box builds on pallets

This all leads to our clients' purchasing department managing one clear and concise PO from us while we manage their entire mechanical assembly through to its entirety.

4. Easily Calculated Landed cost

Three low-volume build machines in a row If we live in a world where many purchasing managers' performance is based on the cost savings they provided in a particular area, wouldn't it be great if they could significantly reduce the landed cost?  When choosing a CM that has an extensive list of in-house capabilities, like PEKO, there will be no markup for each of the individualized component which makes up their entire major mechanical assembly.  When you outsource parts from many different suppliers, you'll find that there's tons of waste in drayage, handling, warehousing and overhead costs.  These costs all become burred and it becomes difficult to negotiate with all of the different suppliers.

In Conclusion

Many Purchasing Managers are finding the ease of switching to a Contract Manufacturer for their major mechanical assemblies.  With simplified POs, a managed supply base, reduction of suppliers and an easy to determine landed cost of product, the advantages are clear.  For more information on how PEKO can help save the sanity of your purchasing department, click the link below!

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Topics: Contract Manufacturing, Contract Assembly, Purchasing