OEMs may be happy to push cost and complexity outside of their company walls—and tier 1 suppliers may be just as happy to pick up the pieces and build their own vertically integrated operations in a bid to improve their competitive positioning and gain additional margin—but there is also a downside for OEMs: they are relinquishing control over huge chunks of their manufacturing cost structure.
For a company to realize its full manufacturing potential, it must adopt a true end-to-end perspective that expands optimization from raw materials to end consumers—and even to recycling. Best-practice companies are already capitalizing on their manufacturing know-how to boost both internal performance and that of suppliers along multiple tiers.
This trend has found firm footing in the automotive industry, where upstream, high-touch supplier fitness programs are common. Even market-oriented companies such as Mondelēz, Bosch, and Siemens Home Appliances have launched joint initiatives and expect high payback in terms of cost competitiveness, more innovation, and improved delivery performance and quality. We should see increased downstream optimization as well, driven by joint manufacturing forecasting and planning, value-added specialized services, and the capitalization on customer intimacy to encourage recycling.
The key is for companies to take advantage of their true end-to-end optimization potential to get back into the driver’s seat. Undoubtedly, the importance of manufacturing in this process will rise again as a consequence.