BEYOND
TIER 1

Outsourcing is a great choice when a customer has a big-picture strategic interest in their approach to production. As technology is developing and products offered with four or more types of engines (diesel, hydrogen, hybrid, electric), it rarely makes sense for an OEM to invest in the capability to manufacture all those types.

Outsourcing gives OEMs flexibility and the ability to react to changes in a supply chain and market demand by fixing production volumes. Versatile Tier 0.5 suppliers, like Fortaco, can do everything from components to module and full vehicle assemblies, including factory acceptance testing and final touch-up painting and labelling.

A good Tier 0.5 supplier can fix things in production flexibly. When 3D-model parts don’t fit perfectly together, adjustments need to be made. This can create turbulence in the production of OEMs factory, but a Tier 0.5 supplier is and should be able to fix the problem on the fly.

A common challenge, when deciding about outsourcing is that sourcing managers might get bonuses incentivized by product costs. Whether a company chooses outsourcing or not, it can be greatly affected by how sourcing managers get their bonuses. This is a common challenge since bonuses are generally incentivized with product costs. This does not always lead to select outsourcing, which often could have been more beneficial in the bigger picture. What a company should be after, is a high profit and low capital.

How can assembly outsourcing impact a capital requirement? How did Mercedes get better painting quality for their automobiles by Saab?

Find out by downloading our white paper.