Purchasing personnel are understanding the benefits of buying assemblies:
Unbeknownst to most Salespeople, Purchasing folks do more than wait around for Salespeople to bug the heck out of them all day with phone calls, meeting requests and small talk. Purchasing managers and their counterparts have long, tough days filled with activities like Supplier evaluations, plant visits, contract negotiation, dealing with Engineering and database records maintenance. The more suppliers and parts that have to be managed, the more these tedious tasks need to be accomplished. It's a veritable pandora's box!
Luckily, there is a strategic solution that can help to reduce all of those activities so the Purchasing group can focus on their most pressing matters. By buying turnkey assemblies from value-added suppliers with wide capabilities, the purchasing group can save on time, resources and headaches. I've written about the Engineering and Manufacturing advantages of buying turnkey assemblies before: here, here and here, but this article will focus on the advantages to the Purchasing group as well as the overall cost advantages.
1. Turnkey Assemblies mean simplified PO's
One of the great things about Turnkey Assembly purchasing is that by placing the PO for a Higher Level Assembly, the job becomes much easier. Otherwise, a PO has to be made for each or groups of items on the BOM. This can make the job extremely tedious. It can take days just to issue all of these POs and with each new PO, the risk of error becomes greater. Buyers and purchasing folks are finding that by using a Turnkey Assembly manager, they can simply write a single PO for the entire unit and move on to the next task.
2. A Contract Manufacturer of Assemblies will manage sub-suppliers
Like above, a major time consuming job function is related to managing a large number of suppliers spread across a large number of BOM parts. By choosing a Contract Manufacturer with a depth of capabilities, this can easily be mitigated. The CM will be able to manage the parts within its own capabilities, and then manage its own supply base of sub-tier suppliers for secondary ops. This is all built into the overhead and the CM will manage all of this so the OEM customer does not have to bother with all the headaches of managing the supply chain within.
3. Reduction in Supply Base
I've been in this business for years, and more often than not I see OEMs are trying to reduce their supply base. After years of doing business, they end up with a database full of suppliers. This database is costly to maintain due to audits and other correspondence. Therefore, it is usually the task of the Purchasing group to reduce the number of suppliers so that the best and most capable remain. By choosing a High Level Assembly provider with vertical integration, they can easily take a few of the suppliers off their list. For instance, if you need a mechanical assembly and you choose a supplier like PEKO, you'll have a Contract manufacturer that can provide an assembly and still manufacture the CNC Machined parts, Sheet Metal Fabrication, Wire Harness, Powder Coating, Welding and Integration. That's easily a potential of eliminating six vendors by utilizing just one. A reduced supply base is an efficient base.
4. Easily calculated landed cost
Last but not least is the easily calculated landed cost. Many purchasing managers have their performance based on the cost savings they provide in a particular area. By choosing to go the assembly route, they can easily see a landed cost of the item. If they choose a CM with lots of capability, there won't be markup for the components that are made in house. Compare this to a situation where the purchasing group outsources parts from many different suppliers, and you'll find there's a ton of waste in drayage, handling, warehousing and other overhead costs. These costs get buried and make it tough to negotiate with suppliers.
Of course there's more reasons why Purchasing Managers are looking at Higher Level Assembly as a great option to mix and matching parts across the vendor base. I'll get to those reasons at a later date. Until then, we can be sure that purchasing groups that are buying assemblies are enjoying simplified POs, a managed supply base, a reduction of suppliers and an easy to determine landed cost of product. For more information about how PEKO takes all these into consideration for its customers, contact me at email@example.com or just click below.