Background: Our client is a North American distribution firm
which marketed industrial products to a large customer base in the US, Canada,
Europe and Asia. The firm outsourced
the manufacturing of their products to suppliers in the US and Asia but
maintained an extensive engineering group responsible for product quality and
development.
The client had an existing
product popular with their clients – however, the client’s supplier had
increased pricing 4 times over the last 3 years. Thus, the client’s profit margin was decreasing and they did not
have additional qualified vendors.
Client felt the vendor would
continue to raise prices because the client had mistakenly signed a
poorly-crafted exclusivity agreement with the vendor and the product required
some technical complexity, which not all vendors could replicate.
Challenge: Develop prototype equipment at a reasonable price which could produce the product at
existing specifications. In our
discussions with the client, it was determined that if the equipment could be
developed, the client would be able to make the product much less expensively
than their existing supplier. The
client had developed the design specifications for the machine and identified a
local manufacturer who would operate the equipment. However, price quotes from US fabrication firms were very high
for the prototype equipment, since our client was not going to buy a large
volume of these machines.
Solution: EWA recommended and performed a multi step approach:
The EW solution was to develop the prototype in China, with focus on
protecting Intellectual Property. This task was easily done by performing all
basic work on the prototype machine in China, leaving the "integration
work", such as Microprocessors, dies, etc. to the US Engineering team.
Finished Drawings and such were coordinated by the US client, however, the
bulk of the work was done by the Chinese fabricator.
Through the EW contacts, an Asian fabrication company was
used to build the prototype machine.
This fabrication company has been used numerous times by East West and
will honor the ‘Secrecy Agreement’ with the US client.
Final result of this effort was an estimated 60% reduction in total cost of the
prototype, and confidence in IP protection.
Result: The US client was very pleased with the 60% cost
savings. East West is performing
quarterly product quality checks on the manufacturer to ensure they are meeting
quality specifications. This model
could be used with any prototype needs as a cost reduction
method.
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