The changing relationships between original equipment manufacturers and their suppliers
by Gerald S. Cole
International Journal of Technology Management (IJTM), Vol. 3, No. 3, 1988

Abstract: Original equipment manufacturers (OEMs) in the USA are undergoing considerable change as they respond to and successfully meet the pressures from worldwide competition. An essential ingredient in this change is the requirement for a new type of supplier. Appropriate suppliers will no longer be those who can deliver the lowest-priced products or materials. Rather, selection will be based on a broader range of criteria, including management capacity, technical capabilities of design and engineering, delivery practice, product quality, control of manufacturing operations and commercial performance in a worldwide competitive sense. In order for OEMs to achieve total quality excellence, timely development of new products and competitive pricing, changes in the supplier-purchaser relationship will be needed. OEMs will develop close, long-term relationships with their suppliers, who will participate in product design and may be single-sourced for longer times than the usual one-year period. The emphasis will be not on the lowest cost for a component or material, but on the OEM's lowest total product cost; as OEMs reduce overhead costs, by decreasing their in-house capability, there will be increasing opportunity for aggressive suppliers to participate in the design-and-build process as full team members.

Online publication date: Tue, 26-May-2009

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