About the client
Industry: Consumer electronics
Product: Smart wearable product
Company Size: Startup
Location: United States
Challenges
- With no prior selection, the client co-operated with a tier 1 contract manufacturer (CM) for new product introduction (NPI) and mass production introduced by third-party;
- The manufacturing service agreement (MSA) was not reviewed or advised by any manufacturing professionals;
- The client wasn’t sure how much to pay, though appreciated CM’s capabilities and been assured of “the best deal”;
- The tier 1 CM charged high prices for all of the engineering support (non-recurring expense), and production line setting up and idle capacities;
- Lacking experience and sources, the client relied heavily on the tier 1 CM for sub-supply chain sourcing and management, thus losing the bargaining chips;
- The client did not have enough access to critical component suppliers;
- With no cost risk highlights or verification method, the client was charged excessively on excess and obsolete (E&O) parts, product price variance (PPV);
- The CM did not support the client’s tight-scheduled Black Friday and Christmas sales because of lacking resources;
- The business relationship between the client and the CM was strained;
- The client failed to get related data from the CM when proposed to shift to a different CM for tooling and fixture;
- The client’s company was expected to be acquired by a Swiss company, but not without a solid CM partner to deliver high quality products on time and on budget.
How we helped
- Aligned with and understood critical commercial and technical requirements with client’s CEO and CTO;
- Jointly defined, reviewed and agreed on the request for quotation (RFQ) and MSA;
- Reached out to 6 other supplier candidates for further discussions;
- Assessed, reviewed and verified potential suppliers’ capabilities in fulfilling the requirements;
- Ran SWOT (strengths, weaknesses, opportunities and threats) analysis on the supplier candidates;
- Down select 4 supplier candidates, and ran further reviews;
- Did a one-week onsite assessment with the CTO, and advised pros and cons after each visit;
- Reviewed RFQ responses to benchmark the quotes;
- Provided MSA negotiation strategies and tactics to earn the client a fair deal.
Results
- Successfully selected the ideal supplier for the client, fixing the previous problems;
- Reduced 22.5% of the overall cost, which contributed to saving $112,500 in the first year;
- The client gained more potential to be acquired by the Swiss firm.
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Supply Chain Management
Insight Solutions Global helped to improve the overall supply chain performance via reducing lead time, saving about $145,000 packaging costs, and building good supplier relationships.
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Insight Solutions Global helped resolved the gap issue, drove the communication efficiency, guided the supplier to set up measurement system, and finally increased the yield rate to 99.48%.
Product Cost Reduction
By making the most out of the identified cost reduction opportunities, the client saved $857,635 in 3 years, earned the competitive edge on the market, and gained bargaining power in the supply chain.