System supplier

A system supplier develops, documents and constructs components of the products of a device manufacturer ( Original Equipment Manufacturer (OEM)). In addition, he also has the option of manufacturing these components as well as delivering series and spare parts for the device production of his client. The system supplier's specialization in his core area means that cost advantages can be realized for his client .

System suppliers are also referred to as tier one suppliers (tier = rank), in contrast to parts or component suppliers (tier two) and raw material or material suppliers (tier three).

General information

In recessionary economic phases, suppliers from the mechanical engineering and device construction sectors feel particular pressure from the market. Since the supplier market has so far represented itself as a buyer's market , it is easy to imagine the extent to which changing market conditions affect the original equipment manufacturers (OEM) on the supplier market. The suppliers' negotiating leeway is largely determined by the OEM customers. Competition and cost constraints are passed on directly to the supplier. All the more, changes in this market should be registered and analyzed so that the companies in this branch of industry can review their strategic orientation and, if necessary, adapt it to suit the situation.

The increasing internationalization of competition leads the original equipment manufacturer to existential cost pressure. The competition accelerates the process of shortening product life cycles. The time from the market launch of an innovative product to the next is shortened dynamically. In contrast, it must be noted that the design and development times that are necessary for very complex systems in order to allow new technologies or technology-intensive products to emerge are increasing.

The result is a dramatic increase in R&D expenditure, which, not least, has a considerable negative impact on the company's cash flow . Accordingly, in addition to the need for productivity increase, to strengthen their competitiveness to shorten the product development time is of essential importance. However, this must not be borne by higher R&D expenditure.

For this purpose, the OEMs use what are known as system suppliers. These are able to relieve the core areas of the OEM through a comprehensive range of services from development, design and manufacture as well as delivery in series to the creation of technical documentation and taking over the spare parts management.

In contrast to the module or parts supplier, a system supplier is characterized by a high level of in-house development.