From the article: "Next, work on clearly defining the role of the vendor in R&D, Beta start-ups, production, etc., so there is no mystification of roles." I agree, Nancy, sometimes these definitions are either overlapped or forgotten in the grand scheme of things.
"Minimum order quantities also must be considered because many suppliers will only take on a new custom assembly when quantities are large enough to work with their business model create a quick payback."
Very good point - When a minimum can't be met but for whatever reason, a custom assembly is required, flat fee-based services may be preferable (or even if the minimum can be met). This would eliminate the need to be concerned about who owns the IP as well. And as the article states - it is a very good idea to define the roles of all participants up front.
I do agree that in many cases, partnering with a supplier to produce a custom assembly makes sense (especially in the case of motors). However, outsourcing custom assemblies also has its own set of unique issues that must be considered.
Agreements have to be worked out up front on who will own the IP (intellectual property). Otherwise, if the supplier owns that IP, they may continue to raise costs every year (because they know they have a monopoly on this design). Minimum order quantities also must be considered because many suppliers will only take on a new custom assembly when quantities are large enough to work with their business model create a quick payback. High mix/low volume product lines do not easily lend themselves to custom assembly by suppliers.
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