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Manufacturer or Assembler

Are you a Manufacturer or Assembler? There are multiple types of manufacturers. Lots of times individuals consider themselves manufacturers when it is possible that they are really assemblers.

Every manufacturer assembles goods. Toyota consider themselves to be in assembler. So what is the difference between a company that considers themselves a manufacturing company and a company that considers themselves an assembly company?

It really gets down to what you choose to call yourself and how much of the content of your product is built in-house versus by a supplier. Think about a computer. It has a:

  • Case
  • Power Supply
  • Mother Board
  • Microprocessor
  • I/O Devices
  • Mass Storage Devices

That is all there is in a computer. All of those parts are standardized and the companies that build computers don’t make even one of the components.  This type of manufacturing company is an assembler.

As a company there is probably not much value in determining whether you are a manufacturer or an assembler. However, the risk to your company changes based upon whether you are a manufacturer or assembler.

Sub-components and Suppliers

Toyota builds about 30% of their sub-components. Suppliers provide the remaining 70%. Toyota has decided that the 30% that they build gives them a competitive advantage. If you are an assembler and 100% of the parts come from suppliers then your whole value add is assembly.

Analyze the percentage of the sub-components that you deliver to your products.  Is this a high enough percentage that it gives you a competitive advantage?  Run Lean if it is not. Lean Six Sigma will make you as efficient as you can be. If you have a competitive advantage then you have some margin though you could gain additional margin by implementing Lean Six Sigma.

Lean Six Sigma decreases Lead Time by removing activities that do not add value for the customer. Lean Six Sigma also increases quality by decreasing the amount of work done on the product and finally Lean Six Sigma decreases cost by taking excess work out of processes.

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