Posted on 23 Jun, 2014 by Neil Sharp
When it comes to supply chain outsourcing the word ‘intelligence’ is often used by companies in order to try and differentiate the services being offered. But what does this term really mean in the context of Electronic Manufacturing Services (EMS) and how intelligent can a supply chain really be?
Each Contract Electronic Manufacturer (CEM) will no doubt have their own subtle take on how this definition applies to their business – which can be confusing for Original Equipment Manufacturers (OEM) looking to make strategic decisions about subcontracting their manufacturing. The purpose of this blog post is to look at the three core areas that, when combined, I believe make up the foundations of intelligence within any EMS supply chain.
Predicting ongoing demand
In order for any electronics assembler to start applying intelligence to the supply chain they must first understand what forward demand they will be expected to support. If you are an OEM, you are likely to have both historic sales information and future forecasts for each of your products. It’s important to share this data with your EMS Company so that they can use this to understand what kind of demand levels will be generated down at component and material level. It’s not uncommon for multiple top-level products to use common components which, when identified and bought intelligently, can lead to economies of scale and cost reductions associated with outsourcing.
Don’t be tempted to hold off sharing this information because you are concerned it’s not 100% accurate – very few forecasts are! A good outsource partner should be able to demonstrate that they have the people, systems and procedures in place across the business to continually monitor forecasted demand against actual performance, and deal efficiently with the fluctuations between the two.
Setting up supply chains – one size does not fit all
If you are looking for a CEM to procure all of the materials on your behalf (as opposed to you free issuing them) then I’m guessing you also want the supplier to take control of your forecasted sales demand and propose a supply chain outsourcing solution that works for your business.
Every product or assembly is different and requires careful consideration and planning in order to set up the appropriate processes, inventory and supply chain flexibility. If, for example, your product is a highly complex machine, say, consisting of over 1000 different electronic components across multiple PCBA’s, plus machined parts and bespoke top-level metalwork, then it may make sense for the EMS provider to do the following:
- Keep a quantity of finished product in stock so you can call off for next day shipment.
- Build up sub-level works order assemblies so these can be configured quickly into top-level units.
- Ensure the supply chain holds agreed stock levels on any long lead-time items.
- Procure, inspect, test and store obsolete items in advance to guarantee continuity of supply.
Clearly, this is just one scenario, there are many more variations in between. Depending on your own product and the levels of commitment you are prepared to give to an EMS Company will determine what solutions they suggest are the most suitable. Experience suggests that in many products there’s only ever a handful of parts at any one time that really need close attention, so this is where you want both experience and intelligence to come into play from your nominated assembly house. If you only really need to commit to one or two long lead-time components to significantly reduce the overall lead-time of your product, then don’t be tempted to give your subcontract partner a purchase order for every single part on the board just in case!
Securing the future of your product
Whilst there can be a huge amount of time and complexity involved in setting up an initial supply chain, it could be argued it’s one of the more straightforward parts of the process. The real intelligence, and where you will find considerable differences between CEM providers, is in the ongoing management of such a chain.
Within such a volatile market, I believe, it’s essential for all EMS companies to:
- Continually monitor the life cycle status of the materials used within their customer’s products.
- Protect the goods coming into the supply chain from the rising threat of counterfeit.
Fluctuating electronic component lead-times, obsolescence, legislation changes, Last Time Buy (LTB), Product Change Notifications (PCN’s), and allocation issues are all daily occurrences within the electronics component market and must therefore be monitored closely. If a component within your product is due to become obsolete anytime soon or may have been changed by the manufacturer in such a way that its performance is effected, you are going to want to know about it right?
An EMS company claiming to offer an intelligent electronic supply chain are likely to have invested in life cycle monitoring tools to enable them to communicate and manage these types of issues in advance of them causing you any pain. By acting upon such information early, perhaps by securing sample alternative devices and then fitting and testing them through a controlled New Product Introduction (NPI) process, a seamless transition can take place without impacting sales or delivery.
And finally, trends indicate that unfortunately the threat of counterfeit parts is still on the rise. It’s important therefore that there’s intelligence applied when it comes to the integrity of the parts being sourced. Ideally the EMS Company will have vigilant procedures in place to protect against any such devices making their way into your products.
Some contract electronic manufacturing partners will be able to offer you this service at an additional cost through third party test houses. Others may include this as standard if they have already invested in their own dedicated in-house component test laboratory. As new counterfeiting techniques continue to evolve, expect to see a combination of X-ray, microscopes, electrical testers and chemical marking analysis being used. It is recommended then that you ask potential partners about what type of equipment they have and the level of inspection checks they offer as standard.
So, an intelligent supply chain to me is one that can predict what is needed in the future but is agile enough to adapt to fluctuations in demand. It should be tailored around each unique product a customer has, but lean enough to limit excess stock and cash commitments having to be made. But most importantly of all, it sits quietly in background watching and listening, ready to evolve, way before human interaction is needed.
Image by Jen Caruso