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Decision Making and Problem Solving

Group presentation
Sabri
Lily
Shirlien

Company profile
Our company has product range of over10
different models of washing machines and
refrigerators,
Total international employees of 2200
We have 2 large factories in Poland and retail
outlets in Europe and Australia.

Third option : Original Equipment


Manufacture(OEM)
The definition of OEM:
OEM production, namely OEM production, also known as designated production,
commonly known as the generation of labor, the basic meaning of brand producers
not direct production product, they use their mastery of the key core technology is
responsible for the design and development of new products, control sales channel,
specific processing tasks entrusted by means of contract order of similar products
of other manufacturers. Then ordered products low price to buy, and original
equipment manufacturer directly with our own brand logo. The entrust others or
OEM production cooperation way, manufacturer is called OEM undertake
processing tasks, the production of products known as OEM products

OEM (the Original Equipment Manufacturer)


method in the manufacturing industry, especially
in the rapid development of information industry
application is very extensive. With further speed
up the development trends of economic
globalization, OEM requirements, may choose
OEM suppliers in a larger scope, especially to
processing and manufacturing cost of countries
and regions.

The basic conditions of the OEM


The delegate
1.excellent technical output
2.excellent brand image
3.the extensive market network
4.product development capability
5.technical control ability

The manufacturer
1. excess, excellent manufacturing capability
2. the sincere cooperation intention
3. to have stronger controls the market direction

Overview of Jiao zhou


Traffic conditions
Jiao zhou is one of the important transport hub, shandong peninsula connection at
home and abroad is adjacent to Qingdao port, former bay port and other ports, at
the same time will lead to jiao zhou Qingdao metro and rail transit. Jiaoji
passenger dedicated line producing soft container bags. for station will be zero and
jiaodong international airport transfer, three expressways and four railway
constructed the help of jiaozhou seamless connection for land, sea and air. And
China railway union of Qingdao container terminal is located in jiaozhou, has
been opened to xinjiang huoerguos trains, through Amsterdam, the original 45
days of shipping time shortened to 15 days of the railway transport; The other one
is the only alternative to the electrification of Qingdao jiaozhou. jiaoji passenger
railway station passenger site.. At present the city road open to traffic mileage
reached 1780 kilometers, highway density up to 147 km/hundred square
kilometers; Railroad traffic mileage reached 85 kilometers

The economic situation


Industrial situation:
Producing soft container for government on
equipment manufacturing, general aviation,
modern logistics, Marine biology, cultural
tourism and modern agriculture industry sector.
Cultivate home appliance, cold chain, digital
equipment, boiler and auxiliary machinery, wind
power equipment industry.

There are many international brands have their


own contract in jiaozhou, such as Nike, Adidas
and so on, we can seek its OEM partners in
jiaozhou, produce according to the requirements
of our goods in conformity with the quality
standards for our brand.

The pros and cons analysis


Producers of benefits
Relative to the purchasers and suppliers in a relatively passive position,
however, USES the way of OEM is still profitable.
1, to enter the international market, participate in international
competition
In recent years, the domestic home appliance industry increasingly
fierce competition, the market tends to saturation, some domestic
manufacturing enterprises in order to expand the market, and do OEM
for foreign brands. To enhance the global awareness of the enterprise.

2. scale production, reduce the cost


Universal existence in the modern production economies of
scale, with the expansion of output and presents the unit costs
decline trend. This may come from the deepening of
specialization, fixed cost allocation. If the enterprise itself
exists the overcapacity situation, the effect of cost reduction
will be more obvious. Participate in OEM supply, means that
the expansion of output, not only increase the sale of products,
and reduce the cost.

3.learning experience, perfect management


Provide OEM companies tend to play an
important role in the supply chain of OEM buyers,
OEM buyers can in production management,
marketing, product development, etc., have
stronger power, in the process of cooperation,
OEM suppliers in product quality control, cost
control, control of the operational efficiency
management organize production according to the
requirements of the purchaser, with advanced
control, from the "dry middle school" the
accumulation of experience, improve the
management level of enterprises.

4. product innovation, improve ability


If belong to innovative products, OEM products
supply companies in addition to meet the needs
of the purchaser, can also with their own brand on
the market at home and abroad. Or increase the
length of the line, to launch new products, Or to
deepen the depth of the product line, increase the
variety of existing products, no matter from
which on the one hand to increase the
competitiveness of the enterprises.

OEM way for both buyer and seller, in addition


to sharing products overall competitive
advantage, also has a distinctive advantages, that
is the flexibility of buyers and sellers in the
market. As long as the buying and selling any
party found more profitable way, you can
terminate the contract at any time. From this
perspective, the OEM market is highly effective.

5. sales of saving investment


When enterprises face the foreign market, due to
the region, the different business practices, it is
difficult to establish a completely independent
distribution network. But if borrow foreign
company sales force, it is much more convenient.
Such as Fuji, Ricoh, etc. all of its
manufacturers and brokers in Europe and the
United States to take the way of OEM, thus
reduce the friction in the operation of enterprises,
reduce the enterprise should have put a lot of
sales, the enterprise can adapt to operate in
overseas.

Manufacturing defects
1. In the process of production, if the products
dont have good quality, brand enterprises will
suffer great losses, so the brand enterprise during
processing will certainly to strict quality control.
But there is no promises of the quality after the
contract.

2.The legal problems existing in the current


OEM
1).contract, the parties, the lack of legal
consciousness
2). if the logo are trademarks of the third person
3). OEM sales of OEM products in the market
without the client's consent
4). OEM when selling products in violation of the
rules in the trademark law of China
5). OEM products might be labeled with the fake
and address of the manufacturer and the origin.

The solution

In order to avoid disputes, reduce unnecessary losses, the two parties in


the OEM contract, should pay attention to the following items:
1.sign a detailed contract
(1) OEM partners shall, according to the relevant requirements of the
contract law contract law to sign the contract
(2) the client shall provide valid business license or business registration
certificate, qualification certificates. Provide copies, OEM contracts
through agents must also provide valid principal-agent book.
(3) OEM involved the use of a registered trademark, the client shall
provide valid certificate of trademark registration; A copy of the
trademark registration, shall be made to the local administration of
industry and commerce or the corresponding certificate issued by a
relevant proof.

2.Regulate the behavior of trademarks of OEM logo


In general, for OEM clients or OEM, to solve good
OEM in the process of intellectual property rights and
other legal issues, one of the most important is to take
effective preventive measures, including related
intellectual property rights in the entrust agreement
expressly agreed upon, to query may involve
intellectual property situation, strict censorship of the
other party provides intellectual property certificate, etc.
If consider the solution until the dispute has appeared
again, for related enterprises, the damage may have
been unable to avoid.

Work flow of outsourcing an OEM

Step 1:
Sample product provided from us
Design Sketch is provided from us
Step 2:
OEM Manufacturer Outsourcing:
Detailed product information and product expectation is delivered to various
outsourcing manufacturers to receive quotes. Integration is performed to achieve
buyer's outsourcing goal if necessary.
Reverse Engineering:
Product structure and parts analysis
Step 3:
Mould Design & Prototyping
Procurer agrees with technician dept.'s proposition of product solution
Step 4: Sample is provided by outsourcing supplier
Step 5: Approval from buyer & Certification Obtaining (CE, UL, RoHS...)
Step 6: Mass Production Starts & Material Quality (Raw Material Procurement) is ensured
Step 7: Technician Onsite Inspection
Step 8: Quality Control : In-Process Inspection
Step 9: Final Inspection
Step 10: Logistic Handling : Pre-Shipment Inspection

Financial Concern
The financial impact of poor change management with our CM is
simple:
either end up with too many of the wrong parts leading to excess and
obsolete (E&O) inventory
not enough of the right parts resulting in shipment delays and potential loss
of revenue
or, even worse, defective products shipped to our customers.

Financial Concern Cost Sheet


Own Factory

Outsourcing for OEM

Materials

$780,000

$700,000

Labour

$60,000

$10,000

Finance

$40,000

$10,000

Freight

$40,000

$40,000

Overhead

$80,000

$40,000

EMS Profit

$40,000

Total Cost

$1,000,000

$86,000

From the above comparison of establishing our own factory and outsourcing for OEM, we could see that
the cost of outsourcing for OEM is lower than setting up our own factory, by nearly 15%.

Operational Concern
Key inputs such as geographic location, technical capabilities,
materials management capabilities, quality control, strategic fit, and
financial health are overlooked or discussed too late in the evaluation
process
Cutting corners like this is often justified in a variety of ways:

by pointing to an existing operational problem;


out of frustration with the current CM;
in time for a new product launch;
in response to immediate margin pressures;
or a combination of these factors.

Human Resource Concern


Lack of staff that can rely on sufficient travel budget to build and
maintain relationships with their overseas counterparts.
Staff lack of ability to effectively socialize and establish personal
relationships in Asia
The staff of the OEM may not be educated on the cultural sensitivities
Undoubtedly influence the mindshare we receive at our
manufacturing partner.

Logistics Concern
Material Procurement
Based on Customer forecasts, order material to meet anticipated Product
demand and any demand flexibility requirements

Supply Chain Management


Negotiating prices and warranties with material Suppliers. Managing the
relationship between Customer and Supplier

Provide cost efficient manufacturing options


Location options, skilled workforce

Merits And Demerits Of The OEM


Merits

Allow us to Expand its technical resources without increased overhead


Manage its internal resources and costs by focusing on core competencies and highvalue projects while reducing or not adding infrastructure or technical staff.
By concentrating resources with a single-source provider, the outsourcing client can
minimize technical transfer of projects or products
Reducing unforeseen costs and potentially speeding new products to market

Demerits

We do not have direct control of the project in regard to scheduling, cost, quality or
accountability
Note- For small companies, contract manufacturing may not be a good business
strategy.
For large companies that are trying to extend into new markets, contract
manufacturing may be a good choice.

relationship management with


stakeholders
Stakeholders
Supplier raw material provider
Customer our company

Success of contract manufacturing depends on the mutual


understanding between the contract manufacturer and the
stakeholders
The relationship depends on mutual trust, and hence the
communication between the two parties must remain open.
This will help both the sides to understand the requirements of
maintaining the partnership.

Product Life Analysis


The strength of the European manufacturing industry should be
based on quality, not quantity.
The focus of our OEM should be ensuring that the manufacture of
Europe developed, high technology, low-to-medium volume products
can also made in China.
However shortening product life cycles will be a concern considering
Chinas workers education and the quality raw materials from China
supplier.
This makes us shorten the supply chains and protect the build quality
of our products, and extend our product life cycle.