What’s OEM Manufacturing?
Original equipment manufacturer refers to the firm that manufacturers a hardware and sells it to a different company. The buying company then markets the product as its own.
For instance, a company that manufacturers computers may need a certain hardware that they don’t manufacture. However, once they buy, they’ll market the entire laptop as their own.
The parties’ sign a contract for reselling making it easier for the buying firm to market the product as its own.
These are common tasks in OEM manufacturing China
- Feasibility Study
Before you implement OEM market, you need to be certain of what you’re getting yourself into. What are the potential costs and risks that you’re likely to face? If you don’t know this, you’ll be setting yourself for failure.
Don’t let this happen. Undertake a comprehensive feasibility study. That’s the only way to know whether the venture is worth your time and money or not. There’s no need to waste your resources on a project that won’t earn any income.
A feasibility study will help prevent making mistakes that threaten the success of your business. You’ll also get an understanding of what you need to start and run a successful business. Such include the capital requirement, minimum reorder level, and other startup costs.
The feasibility report will shed some light on product costing and pricing to adopt for your items. It’ll help you examine the applicability of an idea.
- Product Costing
Product costing is an essential step in any manufacturing process. It’s from this that product pricing is based.
Here, you need to breakdown precise approximation for various costs aspects. Some of these include the purchase of raw materials, assembly, and prototyping.
As a business person, you need to keep track of costs from the start to the end. That’s from product design, conceptualization, prototyping, manufacturing, and shipment.
The process helps you keep track of the costs you incur to get the product manufactured. With this, you can set the best price that ensures you make a profit.
- Contract Negotiations
In China, most firms have undescriptive contractual agreement with their clients. Here, businesses develop partnerships on basis of mutual understanding and long-term relationships.
That’s where the need for a definitive agreement comes to play. As such, you need to observe culturally acceptable negotiating strategies. In this way, you’ll be able to create a mutually beneficial agreement.
But, it’s crucial that you have an enforceable contract. Be sure to balance these two aspects. But why?
Most OEM manufacturers in China rarely concede without broader consultations. As such, be patient in any negotiation exercise. Identify the areas of interest while maintaining protective clauses on the agreement.
- Lead Time Assessment
In contract manufacturing, the lead time for single components impacts on the entire process. For example, a delay at order placement may delay the entire manufacturing process.
Your work is to ensure that this doesn’t happen. Estimates on the manufacturing schedule need to be as accurate as possible.
A strategic lead time management makes it easier for you to launch your products on time.