»More for Less«: Non-Price Issues in Supplier Contracts

Other than price, OEMs usually quote at least two other criteria as a basis for purchasing decisions, these being »Quality«, and »Service«. Sometimes »Technology«, an aspect of »Quality«, is specifically mentioned. »Delivery«, an aspect of customer »Service«, is also often listed separately as a primary basis for making purchasing decisions.

 

Whatever the labels chosen to define the criteria used in the supplier selection process, it is evident that, as for price, the commitment implied by the labels is becoming both broader in scope and more specific in meaning

 

…a strict »zero defects« philosophy is common…

 

By »Quality«, it is normal for OEMs to require products to conform to published international standards and also their own technical standards. OEMs frequently stipulate the internal design, testing and process control techniques to be used by their suppliers in order to achieve the required quality. A strict »zero defects« philosophy is common, whereby defects are kept within closely defined limits and specific targets for their continuous reduction are agreed.

 

Regarding delivery, it is common for supplier contracts to stipulate an »Integrated Supply Management« process. This may stipulate procedures for the release of materials and components, their tracking, receipt, just-in-time delivery and electronic data interchange relating to the entire process. It is not uncommon for OEMs to have very specific requirements relating to logistics, such as the use of regional supply centres, in order to be assured of a continuous supply of the goods that they require.

 

while the involvement in design can be a burden, it can be an opportunity for the cablemaker Logistics and delivery requirements are becoming more exacting.

 

More difficult still is the growing requirement for suppliers to be an integral part of the OEM design process. In order to succeed, a supplier cannot be simply a maker of components; he needs to be directly involved in the design and support of his product as a functioning item or system within the final assembled product. Supplier contracts often explicitly state a requirement for their suppliers to be directly involved in the design process and to deliver innovative solutions without necessarily being prompted to do so.

 

While the involvement in design can be a burden, it can be an opportunity for the cablemaker. At the early stage of product design, OEMs typically look at »functions« rather than »products«. A broad range of disciplines from purchasing through to engineering and design, quality control, marketing and finance may be involved in the process.

 

For any given function, alternative cable solutions with higher or lower electronic content, may be proposed. Being involved in design allows the cablemaker to state the case of the most cable-intensive solution (where appropriate) and to gain better insight into what products he needs to offer other than cable to meet customers’ purchasing needs.