A great many factors go into choosing an electronics manufacturing services (EMS) provider. Based on our experience as an electronics contract manufacturer, here's an inside look at the six criteria we see most often -- and some of the pitfalls you should avoid when you use these factors to evaluate a potential EMS partner.
Almost invariably, an OEM's No. 1 concern is price. They may place high importance on other factors, but in the end, the commercial success of the product depends on meeting margins, which means driving down manufacturing costs where possible. OEMs understand that the lowest price will not necessarily mean the lowest cost, but it's easy to lose sight of this when looking at attractive bids.
An EMS provider may arrive at a low-ball price by cutting corners, for example, skimping on inspections and tests, which will end in higher defect rates for the boards the customer receives. Your effective cost goes up as you add labor to test incoming boards and return those that don't meet your standards.
Sometimes, a low price signals that the EMS provider is willing to treat the project as "loss leader" to get your business. Prices go up steadily on future projects, but it's hard to break ties once you've done the hard work of setting up the vendor. To avoid this, talk to others in your industry and gauge the company's reputation. Do they have many long-term clients with whom they've done multiple projects?
Ideally, a potential EMS partner will offer transparency as to how they will deliver your project at the stated price. Take advantage of the plant visit to look for efficient, high-quality processes with low scrap rates. Look for ingenious use of jigs and fixtures to accomplish tasks with less labor.
Finally, be clear about what's included in the price. Be sure your needs are met with respect to testing, packaging, shipping, and delivery schedule flexibility. Do you expect the EMS to hold inventory for you? Don't assume any of this is included in your price.
There are significant advantages in choosing a manufacturing facility located geographically close to your design engineering team. To name a few:
You will benefit from easy back-and-forth during pre-production and production, and can more quickly spot and resolve any DFM (design for manufacturing) issues.
Plant visits are easier. You can perform your initial evaluation over several visits if necessary, and make frequent visits to monitor production during the life of the product.
It can be easier for the EMS partner to respond to an emergency shipment request. I have personally made weekend and late-night deliveries to local customers in response to their urgent need for extra, unplanned product shipments.
On the other hand, there are cost advantages to assembling your product close to your end users. That makes manufacturing in North America ideal for mid-volume products used in the US, such as industrial automation and monitoring systems, medical equipment and specialty LED lighting systems. Even some lower-volume consumer product manufacturing is returning to the USA as shipping and offshore labor costs continue to rise -- witness the recent announcement from Apple for computers, and from smaller companies such as Element Electronics for larger flat-screen TVs.
Obviously your EMS partner needs to have automation systems that can handle the volumes you need produced. Look at automated equipment for everything from stencil printers and pick-and-place lines to automated optical inspection (AOI) systems. During the plant tour, evaluate their throughput for boards with the component technology and size that you use in your designs. Ideally, your designs will not be pushing the envelope of their capabilities.
Next, consider what percentage of the EMS provider's total business your project will be. Providers should be expected to share some information about their total revenue, and your project should be not much more than about 10 percent of that. While being your partner's largest customer may give you the advantage in mindshare, it also means that your actions can have too great an impact on their viability.
You need a partner with capacity to be there for you during your "ups" but also to thrive through your "downs" -- not one that could be dangerously close to going out of business if your project is delayed or cancelled.
Rich, In fact, everyone is sharing the same production processes and equipment if they have an outsourced supply chain. They have similar exposures and more or less similar advantages. The differentiation has moved from the supply chain to the design and marketing. Not since a long time ago has goodwill become so critical.
You raise some good points on this subject. In my experience it is a very challenging task to choose the correct provider. I also believe companies change providers to quickly rather than working with them to solve longer term issues.
It may not be possible all the time to meet the majr requirements provided in your article. But overall it makes it very clear to chose some one who is not just running the business based on our business.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.