Posted on 15 Oct, 2015 by Neil Sharp
Controlling the supply chain for sheet metal components is no mean feat - particularly when you’re an electronics manufacturing services (EMS) provider responsible for delivering a broad range of products across multiple market sectors.
Sheet metal items can range from small laser cut plates with product markings etched onto them, right through to large, fabricated chassis with bespoke finishing requirements. The challenge for EMS providers is finding the right number of suppliers that offer the quality levels and range of services they need.
So how do EMS companies implement a strategy that not only delivers them quality parts - and caters for the spectrum of services their clients require - but is also easy to manage?
Too much of a good thing
A common mistake is having too many suppliers. It’s very easy for EMS companies to end up splitting their metalwork spend across a large number of suppliers - many of which have been used historically for specific services or projects. For example, an organisation may have certain suppliers they use for laser cutting, but who don’t have a paint shop. This may mean they use another supplier that has painting facilities on-site. And then there are the suppliers that have been nominated by end customers, or those experienced in fabrication – you get my point.
While this approach certainly ticks the "services" box, it can cause the assembly house real headaches in terms of quality control, delivery and day-to-day management time. It also reduces the influence they have over each supplier, as spend is diluted, which can mean they find themselves in a queue along with everyone else.
So, the key for EMS providers is to try and consolidate their material spend wherever possible - without compromising incoming quality, or the range of services they need to cater for. At first, this process may seem daunting. But analysing spend levels, supply frequency, reject rates, services offered and the overall impact each supplier or component has on their business if they underperform (risk) are all good starting points.
Making the grade
How many different suppliers should an EMS provider typically look to work with? Well, this will vary, depending on the spend levels and the products they build on behalf of their customers. But, as a general rule of thumb, half a dozen is both manageable and realistic.
Typically they will look to partner with three or four "key" suppliers and ensure, through due diligence, they can offer all of the services they need, which will include:
- Laser/water cutting
- Powder coating
- Silk screening
EMS providers will be keen to avoid using suppliers that have to subcontract elements of their service out to others - for example, painting, plating or engraving. This not only adds extra layers of cost, but can also impact on overall delivery times and quality standards.
Close proximity to the manufacturing facility will be a consideration for EMS providers, with at least one of the key suppliers just a short drive away. If the assembly partner has more than one factory (one in the UK and one located in, say, Central Europe), they will ensure they have local suppliers in place to satisfy both factories. This approach will mean they don't have to ship items back and forth between sites to avoid additional transportation costs and possible handling/quality issues.
In addition to the key suppliers, the EMS company will then look to partner with one to two much smaller suppliers (often very local to the factory). They serve as a source for sample parts or small batch sizes needed on a quick turnaround.
Clarity and communication
In order for sheet metal suppliers to deliver a sustainable service, both in terms of competitive pricing and quality standards, they need visibility from the assembly house of future orders and general business direction. Communicating live orders and sales forecasts in advance is critical to these suppliers, so they can ensure they have sufficient stocks of the raw materials - as well as the appropriate workforce in place.
The same goes for the future strategy and direction of the EMS company. For example, if they are looking to target a new geographical market, technology sector or consolidate spend, it’s important this is communicated to the key suppliers. This means they are not overloaded - possibly with the wrong kind of work - or left without the correct machinery or equipment.
A monthly performance review of each of the key suppliers should be carried out internally by the Commodity Manager within the EMS company. This should pay close attention to on time in full delivery performance, cosmetic standards and quality reject rates. The feedback from these meetings should then be communicated to the sheet metal supplier at formal quarterly business reviews and reviewed against the agreed key performance indicators. It’s important the EMS company takes ownership of these meetings and agrees a common reporting format and structure across the supply base. This provides a level of consistency and again makes the process for both them and the supplier transparent, as well as effective to manage.
When it comes to supply chain stability, sheet metal components - along with other drawn parts, such as plastics and printed circuit boards - unfortunately, have the ability to halt production overnight. Therefore, it’s vital that your EMS provider has a clear strategy for managing each commodity, and this should be made clear to you when you first decide to partner with them.
And if you are unsure of how your current assembly partner manages these critical items on your behalf, then why not look to find out during the next scheduled business review meeting you have planned with them.
Image by Julian Carvajal