A firm looking for help with the development of a new product asked: “Is it best for OEM customers to use a one-stop shop (design thru mfg) vs. a specialty design house and a separate manufacturer. … What are the pros and cons, from the OEM customer’s perspective?”
The real answer to the question is: It Depends.
Choosing the right team is always important, but what’s best for a given customer and product depends on many factors. It’s just one example of the general “impedance matching” problem like that encountered when matching an employee to a job: even the best employee will be ineffective if given a task that is not a good match with their skills and capacity. A motorcycle engine in a pickup truck will not be very effective. Lots of energy gets turned into heat instead of forward progress…
While it seems easier and safer to hand off an entire project to a one-stop shop at first blush, the efficiency and end results will suffer if either the design house or the manufacturer are not a good match for the product and technology in question. There are numerous instances of large one-stop shops that tell a good story, but cannot deliver in practice because the team they have available is not a good match for the problem at hand. We’ve seen this first hand when we’ve been called in to rectify the situation after the fact. For instance, a perfectly good design that is not well matched to a production facility and a manufacturing team that does not normally handle assembly will be less efficient, or worse. For instance, a manufacturing facility that does not have the proper equipment and personnel trained to build products with the types of sensors and actuators typically found in robotic systems will struggle to adapt. The same is true for other technologies, such as wireless/RF communications or biotech. With a bad match, the process takes longer, costs more, and the customer experiences more quality problems than if performed by a manufacturer that has the proper test equipment, processes and staff familiar with the design, manufacture and testing of such systems. The final cost and schedule can greatly exceed what would be required for a well matched team. This is just as true for the design team as the manufacturing team, particularly if they do not have experience with the specific technology and manufacturing processes to be used. And if the design and manufacturing team do not work well together, there is always the potential for finger-pointing instead of problem solving, even when they are both parts of a one-stop shop. If their team is not the best match, the customer is stuck with them, for better or worse.
The real cost is rarely apparent at the beginning. All-in-one houses have an inherent conflict of interest. An integrated design and manufacturing firm makes the bulk of its profits from the manufacturing, so they are very highly motivated to do and say whatever is necessary to get the OEM to commit to them, in order to land the manufacturing contract. Once they’re committed it’s extremely difficult and expensive to switch to another manufacturing operation.
Hiring separate and independent design and manufacturing operations foster competition that results in better production pricing in the long term.
The ideal choice is a well-matched design team and a manufacturing team that have experience in the technology being used, and a proven track record.
Unfortunately there’s no simple answer, but I hope this is helpful.
– Ken