Foster City, Calif. Contract manufacturers blame poor communication with manufacturers for 79 percent of new product introduction (NPI) delays and 30 percent of product compliance issues (e.g. RoHS and WEEE), causing over 90 percent of suppliers to incur cost impacts that ultimately drive up outsourcing-related costs for manufacturers, according to a study conducted by Arena Solutions, an on-demand product lifecycle management (PLM) software provider.
Arena conducted the study with 400 suppliers and CMs to determine from the suppliers' point of view concerns related to outsourcing practices with their OEM customers. The study indicates that the perception among suppliers is that more effective collaboration with their OEM customers is critically important to address problems including coordinating NPI, managing and communicating product changes, and communicating product information, (e.g. RoHS status), across organizational and geographic boundaries.
The study also reveals a majority of suppliers believe these problems create hard-dollar impacts such as increases in inventory or unplanned rework and expenses. It can also result in the need to increase charges to the OEM, raising the overall cost of outsourcing, according to the study.
Supplier respondents noted that only 40 percent of the OEMs they work with are using PLM, leading to a high percentage of manual and time-consuming processes such as phone calls, faxes, and emails, and spreadsheets being used for communication. In contrast, a majority of suppliers said they see their customers who use PLM software to manage their design through manufacturing process experience fewer errors, improve cycle time, and lower outsourcing costs.
Other findings show suppliers are aware of the problems related to a poorly managed design through manufacturing process. Fifty-four percent of CMs compared to 35 percent of OEMs said design and manufacturability problems cause new product delays. Fifty-six percent of CMs report sourcing problems because OEMs provide approved manufacture list (AML) information too late in the process and include expensive, hard-to-get and obsolete parts.
In addition, 50 percent of CMs say they have poor change communication coming from the OEMs, and nearly 40 percent of CMs say OEMs do not identify compliant parts, and when they do, their use of compliant part numbers is inconsistent. One-third of CMs believe OEMs don't know what type of documentation they need to supply and maintain for compliance.
Suppliers see PLM software as a positive solution, with nearly seven out of 10 saying PLM leads to improved NPI, and six of ten noting PLM improves change management processes and compliance. The research showed suppliers preferred on-demand (SaaS) delivery over traditional client/server PLM software, and preferred Arena PLM three-to-one over Agile as the most productive and easiest to learn solution, according to Arena.