What OEM Customers Want: The Value of Intellectual Property

By Logan Wamsley

Imagine that your product sits on a shelf directly next to your competition. Now imagine that your customer strolls by with their shopping cart and considers each carefully. He or she picks the product up, reads the labels, perhaps shakes it a few times, and then, almost arbitrarily, decides which to take and walks away. What just happened? What was the reasoning he or she used to make that decision? What is it that stood out about that one particular product that determined the outcome?

While many of the products created by an electronic OEM are not going to be found on a retail shelf, from a marketing perspective this scenario is a valuable one because it considers the psychology of the customer. Regardless of industry or the products in question, human psychology remains both predictable and consistent, and can be a valuable tool. Price is unquestionably a factor, but let’s say that all of the products are priced identically. The next factor the customer will consider is the quality of the product in question, or rather, will the product perform its task as good as or better than other comparable products. Should this criteria be at least somewhat comparable between products, then the questions get more interesting. What can this product do better than the others? What separates this product from the competition? What makes this product unique?

It is here where the difference between a successful product and an unsuccessful one is made clear, and engineers have it within their ability to significantly better their odds in a competitive market with the use of intellectual property in their product designs.

With the legal protection of intellectual property rights, OEMs can either manufacture in-house, or work in conjunction with a component manufacturer to design and produce an element of their build — from a circuit board to an individual resistor — only for them. This can then be leveraged in the market to offer something inherently unique to the OEM brand, virtually incapable of being replicated by another. The more competitive the market, the more characteristics play a role in the buyer’s decision.

There are several benefits to the incorporation of intellectual property beyond sales, as well. “In the last two or three years we have borne witness to the most significant electronic component shortage since the turn of the century, with demand far outpacing the inventory levels suppliers would willingly carry,” said Partstat President Dennis Menefee writing for EPS News. “The result has seen component manufacturers achieve record profits and increased overall sales, but manufacturers have also been forced to make a choice between supporting the current market, or continually moving forward with newer product iterations in an effort to be first, stay ahead of competition, and maximize profit margins.” An increased focus on product designs driven by intellectual property will allow OEMs to bypass this scenario and the difficult decisions that come with it. Instead of competing in a component market that is currently being defined by shortages, unexpected obsolescence and allocation issues, extended lead times, and rising prices, OEMs instead can, at least to some extent, operate within a market entirely of their own making populated by a consumer base of one.

Incorporating this strategy can’t be made on a whim, however; careful consideration must be made to the OEM’s ability to both commit to their inventory on the front end of the production process and commit to storing it for the full lifecycle of the product. This requires a significant change in traditional thinking regarding inventory procurement — which often is done on an as-needed basis — as well as a greater investment in the development of infrastructure.

To mitigate such concerns, Partstat offers a variety of services that allow OEMs to make such a transition with minimal friction in the supply chain. A Last Time Buy Solution, for example, allows OEMs to purchase all of the inventory necessary to complete a product’s lifecycle in a single transaction without any loss of upfront working capital. Not only does this preserve the integrity of the supply chain and prevent any and all disruptions associated with inventory procurement, but it also allows the component manufacturer to receive a single upfront payment, which streamlines the manufacturing process and even opens up opportunities for bulk purchase discounts.

This solution even covers the need for long-term storage infrastructure; once the inventory is in hand, Partstat will store all of the inventory on the OEM’s behalf in accordance to the strictest ISO-certified processes, and even ship the inventory on a delivery schedule personalized for the customer. Even sensitive raw die and wafer, central to many OEM efforts to preserve the integrity of intellectual property, can be stored in Partstat’s facilities with the aid of the latest in die and wafer banking technologies.

In short, although the incorporation of intellectual property is not a simple decision, it can be an extremely profitable one that can improve your organization’s standing in not just the customer’s eyes, but in the eyes of both your shareholders and any component manufacturers the organization is affiliated with. And the solutions offered by Partstat may be exactly what your organization needs to turn such strategies into action.