Oracle Outsourced Manufacturing enables companies to use third-party manufacturers to produce goods while maintaining control over their supply chains. This method streamlines production, reduces costs, and leverages external expertise to maximize success.
In this article, we will explore the key features, benefits, and best practices for implementing Oracle’s Outsourced Manufacturing solution and optimizing critical manufacturing operations.
Key Takeaways
- Oracle Outsourced Manufacturing allows OEMs to streamline production while maintaining control over supply chains through various subcontracting models.
- Key features of the Oracle Outsourced Manufacturing solution include tracking and visibility, financial positions, and integrated planning for enhanced operational efficiency and decision-making.
- Successful outsourced manufacturing relies on clear communication and flexibility, as demonstrated by case studies highlighting improved operational outcomes through Oracle solutions.
Understanding Oracle Outsourced Manufacturing
Outsourced manufacturing is a prevalent practice where a brand owner or Original Equipment Manufacturer (OEM) contracts external manufacturers to perform all or part of the manufacturing process. This strategy allows OEMs to focus on core competencies while leveraging the expertise and capabilities of third-party manufacturers. Oracle Outsourced Manufacturing enhances this process by enabling OEMs to streamline and optimize production activities, ensuring efficient management of contract manufacturing operations.
Oracle’s system supports build-to-order and build-to-plan strategies, offering real-time visibility into the complete manufacturing process. This integration allows OEMs to provide specifications while outsourcing the manufacturing of parts or products, ensuring alignment with production schedules and quality standards.
Oracle’s outsourced manufacturing solutions enable OEMs to keep control over their supply chains, tapping into the efficiency and expertise of external manufacturers.
Key Models of Outsourced Manufacturing
Outsourced manufacturing can vary significantly based on factors like the extent of outsourcing, the nature of component supply, and the approach to shipment of finished goods. Oracle provides support for various subcontracting models, each designed to cater to different business needs and manufacturing strategies. These models include Chargeable Subcontracting, Buy/Sell Subcontracting, and Full Outsourcing (Non-Chargeable), offering unique advantages and operational mechanisms.
Selecting the appropriate model is vital to fit your operational needs. Whether retaining ownership of components or transferring them to the manufacturing partner, each model offers unique management methods for outsourced manufacturing activities.
Chargeable Subcontracting
Chargeable subcontracting is a model where:
- The OEM retains ownership of the components throughout the manufacturing process.
- The OEM supplies these components to the manufacturing partner.
- The OEM invoices the manufacturing partner for the usage in assembling the final product.
This method ensures the OEM maintains control over the components while leveraging the manufacturing partner’s capabilities to add value through assembly.
The OEM invoices the manufacturing partner for the supplied components, ensuring a transparent financial transaction. This approach allows OEMs to track component usage and manage inventory effectively, leveraging the partner’s assembly processes. This model is particularly beneficial for OEMs aiming to retain past ownership and control over their components while outsourcing the assembly work.
Buy/Sell Subcontracting
The buy/sell subcontracting model involves the OEM selling components to their manufacturing partners, with each sale treated as an independent transaction. Ownership of the components is transferred to the manufacturing partner immediately upon shipment from the OEM.
Subsequent purchases of the assembled products are treated as separate business operations, providing a clear and distinct transaction process for both parties involved.
Full Outsourcing (Non-Chargeable)
Full outsourcing, also known as non-chargeable outsourcing, is a model where the OEM outsources the assembly operations to a manufacturing partner while retaining ownership of the supplied components throughout the process. The OEM pays only for the value added by the manufacturing partner during the assembly, which ensures costs are controlled effectively. This model allows OEMs to focus on value-added activities and maintain flexibility in their manufacturing operations.
Retaining ownership of the components ensures quality and consistency in the production process, benefiting from the manufacturing partner’s expertise. This approach enhances cost control and flexibility without relinquishing control over critical components.
Major Features of Oracle Outsourced Manufacturing
Oracle E-Business Suite integrates various applications that enhance operational efficiency for organizations engaged in outsourced manufacturing. This suite supports critical business functions such as supply chain management, production scheduling, and quality control, which are crucial for efficient contract manufacturing management. Integrating various modules within Oracle’s Supply Chain Management suite facilitates control over quality and production timelines, ensuring seamless operations.
Among the major features of Oracle Outsourced Manufacturing are Tracking and Visibility, Financial Positions and Accounting, and Integrated Planning. These features enable companies to control their supply chains, manage financial transactions effectively, and optimize operations across various manufacturing locations.
Tracking and Visibility
Oracle provides comprehensive tools for tracking components and assemblies, enhancing supply chain transparency, and ensuring comprehensive visibility. These tracking capabilities lead to better communication and coordination within the supply chain, allowing OEMs to efficiently monitor the status of subcontracting orders, inventory levels, and production schedules.
Improved tracking and visibility contribute to more efficient manufacturing processes and better decision-making for OEMs. Oracle’s tools help companies quickly identify and address potential issues, ensuring production stays on track and meets quality standards.
Financial Positions and Accounting
Oracle ensures clear separation of financial records for outsourced manufacturing components, aiding in precise financial reporting and preventing unintended impacts on the general ledger. The accounting setup allows for separate tracking of subcontracting revenues and associated costs, maintaining financial clarity and facilitating accurate reporting of economic positions.
Integrated Planning
Integrated planning features in Oracle’s system enable effective management of supply chain processes, optimizing operations across manufacturing location sites. These features facilitate the coordination of manufacturing operations, ensuring all locations are synchronized and working towards common goals.
Core integrated planning features help companies manage component supplies better and adapt to varied business conditions, and synchronized operations optimize production schedules and ensure timely product delivery.
Leveraging the Outsourced Manufacturing Command Center
The Outsourced Manufacturing Command Center is a vital tool within Oracle e-Business Suite, allowing OEMs to manage and monitor their contract manufacturing operations effectively. This command center facilitates the automatic creation of discrete jobs at the manufacturing partner’s site, enhancing visibility in the tracking of assembly production.
Dashboards within the command center provide a comprehensive view of key performance metrics and inventory levels, enabling users to oversee the entire subcontracting process. For instance, the Track and Trace dashboard allows managers to monitor the subcontract purchase order lifecycle, identify component shortages, and assess the health of the outsourcing process effectively.
Enhancing Customer Relationships Through Contract Manufacturing
Establishing clear communication channels with manufacturing partners can enhance transparency and foster stronger customer relationships. Partners who prioritize customer feedback can drive iterative improvements in products and services, boosting customer satisfaction.
Best Practices for Successful Outsourced Manufacturing
Flexibility in manufacturing processes is crucial for responding quickly to evolving customer needs and maintaining a competitive advantage. Contract manufacturing agreements can provide the necessary flexibility to adapt effectively to market changes and customer demands.
Examples from companies like APL Logistics and HNI demonstrate how implementing Oracle solutions can enhance capabilities in managing outsourced manufacturing partnerships. These companies significantly improved project delivery times and developer productivity, underscoring the importance of best practices for successful outsourced manufacturing outcomes.
Health and Compliance in Outsourced Manufacturing
Ensuring health standards and compliance is essential in outsourced manufacturing, particularly in electronics, pharmaceuticals, automotive, and consumer goods industries. Managing the quality of raw materials and maintaining compliance with industry standards is crucial for sustaining excellence throughout the supply chain.
Oracle aids organizations in navigating complex regulatory environments by offering cloud services tailored for compliance. Third-party attestations and certifications from Oracle provide independent assessments that support compliance and reporting, ensuring that companies can effectively meet their regulatory obligations.
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Frequently Asked Questions
What does outsourced manufacturing entail for customers?
Outsourced manufacturing involves an Original Equipment Manufacturer (OEM) hiring external manufacturers to handle some or all aspects of the production process, further enhancing efficiency and reducing costs.
How does Oracle support outsourced manufacturing?
Oracle supports outsourced manufacturing by offering a system that enables real-time visibility and efficient management of contract manufacturing activities. The system accommodates both build-to-order and build-to-plan strategies, ensuring optimal execution and oversight in your manufacturing processes.
What are the different models of subcontracting in Oracle Outsourced Manufacturing?
The different subcontracting models in Oracle Outsourced Manufacturing are Chargeable Subcontracting, Buy/Sell Subcontracting, and Full Outsourcing (Non-Chargeable). Each model serves distinct business needs based on cost and management preferences.
How does the Outsourced Manufacturing Command Center help OEMs?
The Outsourced Manufacturing Command Center enables OEMs to effectively oversee and manage the subcontracting process while analyzing key performance metrics and tracking inventory levels. This comprehensive control enhances operational efficiency and decision-making.
How can outsourced manufacturing improve customer relationships?
Outsourced manufacturing can enhance customer relationships by facilitating clear communication with partners and prioritizing customer feedback. This proactive approach drives iterative improvements in products and services, fostering loyalty and satisfaction among customers.
