Procurement focused on non-exclusive licensed products with strong technical support from the licensor and licensees is often the best supply chain option. Why?

When customers engage with licensors and licensees of non-exclusively licensed products, they can get support from the licensor who wants to support end users regardless of which licensee gets the order. Licensees will compete to earn the customer’s business by providing non-price value as well as competitive pricing. Licensed products also have specific manufacturing and quality standards and licensors provide quality auditing of licensees. This provides an outside resource to consult / assist if quality or process issues arise that are potentially related to the licensed part. Licensors and licensees often provide end-users with non-price value in the form of application engineering, technical assistance, training, quality assurance, inventory management solutions and other services and solutions not easily accounted for in the product price.

Forward-thinking manufacturers forge long-term relationships with licensees of products that are non-exclusively licensed and that improve quality and lower cost. These companies would presumably not have invested in the license and pay the ongoing royalty costs for products that do not uniquely add value. These licensees often understand the customer’s business quite well and can provide value-added ideas directly and indirectly related to the products they sell. Since licensees of proven products tend to be more established companies, they often operate globally, have capabilities to produce standard products at many locations and present less risk as a supplier. This ability to source consistently high-quality parts globally saves both time and money.

Buying parts from copycat producers introduces lots of risk to the ultimate product manufacturer. Some questions manufacturers should ask themselves before considering the use of copy parts:

How do I know if the parts are produced to specification?
Who do I turn to if they are not produced correctly?
What recourse do I have if the quality is not acceptable?
Who will be the arbiter if there is a dispute about product quality?
Who has the actual product specifications?
In the context of a line shutdown caused by a copy product, was the perceived savings worth it or did it represent a false economy?

In short, it is easy to see that buying genuine licensed parts ensures lower risk and provides better value for manufacturers.