A leading medical equipment manufacturer was faced with a few large issues... 90% of their injection mold spend was with one supplier, that supplier was not skilled at checking resin indexes and keeping raw material prices in line, and the OEM only had one 1,000 ton press in their supply chain. Lots of risk- both cost and availability- was at stake for the OEM.
A seven figure quote package was sent out to several small local suppliers in addition to a few large national injection molders. While they were working on quotes, the resin distributor was engaged with market data that indicated the price of resin should be 10% lower. Armed with that piece of data along with another willing resin distributor, pressure was applied to the incumbent resin distributor.
The incumbent injection molder was relatively local and shipping large parts several times/ day, so staying local was a priority, but the OEM would consider longer connections if the price was right. The problem with other local suppliers is they did not have a 1,000 ton press, but would agree to purchase one if the OEM would agree to keep the business at the supplier for a certain period of time.
It became very clear the local suppliers were far more competitive on price than the national suppliers- not even factoring logistics cost. Since each local supplier needed to buy a press, it was an all or none package of business.
The work was awarded to a supplier less than a mile from the OEM at a savings of over 20%. In addition, the base resin price was lowered 12% and all future resin buys were tied to the agreed upon market index.
So when all the tools were moved and the project finished, the OEM had two dependable molders, over 30% in savings, two 1,000 ton presses, a tighter supply chain, and lots of piece of mind.
A leading dental equipment manufacturer had continued problems with their dental compressor supplier. That supplier recently moved their operation and was having major issues delivering parts on time and in full. This continued for years. To mitigate the risk, the OEM worked to stock their shelves with several months of high dollar compressors, greatly inflating their inventory dollars.
An alternate compressor manufacturer was approached and promptly agreed to quote the pump. Unfortunately the incumbent compressor was tied to a UL file, so considerations had to be made in the schedule and budget for a change to the UL file along with lengthy performance, cycle, and noise testing.
Once the price was negotiated at a savings to the OEM, the process of onboarding a new supplier began in parallel to the engineering and regulatory work that needed finished. The onboarding process largely involves getting a signed master purchasing agreement.
Negotiating the agreement -while time consuming- was largely uneventful. Payment terms, warranty, indemnification, and a list of other items were agreed upon and risk was placed where it belongs- the supplier was heavily tied to warranty and indemnification damages related to compressor failure.
Once the engineering and regulatory work was complete, the new supplier was given the green light to begin production while the incumbent was informed of the decision to move the business.
Upon project completion, the OEM managed 11% direct material cost savings, inventory levels were reduced substantially, a shorter lead time was established, and a very unreliable supplier was history.
A failing supplier
A Win Win Win Win for the OEM.
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