Posted on 19 Oct, 2015 by Neil Sharp
Transferring your entire manufacturing operation over to an electronics manufacturing services (EMS) supplier is clearly a huge commitment for an original equipment manufacturer (OEM) to make. It’s a major project for any business, but it is actually a more common occurrence than you may think - and there are EMS companies that have tried and tested approaches to take the risk out of making the change.
However, despite months of planning, it stands to reason that you'll still feel somewhat anxious when the time comes to make the transfer to your chosen EMS supplier.
You may be concerned about product supply being interrupted while the physical move takes place; or that your customers will notice a change to the service or quality levels they are used to.
What you'll be aiming for is a smooth, cost-effective and transparent transition, carried out with minimal impact to sales. Thankfully, with a little bit of forethought, this is entirely possible.
Here are some ideas about how to approach this crucial phase, in order to realise the goals you initially set out to achieve from your outsourcing strategy.
1. Adopt a "prepared for anything" attitude
Although it's important to keep a positive mind, you should also prepare for situations that could have a negative impact on your outsourcing plans. For instance, employee resistance could be a factor when a third party supplier is introduced. A reduction in morale, productivity and personnel is commonplace, which could impact the schedule you are working towards.
On top of this, mismatched expectations and cultural differences can create unexpected friction; there could be issues in transferring across data; or legal and regulatory hurdles to overcome. As such, it pays to work with your EMS partner and add to the project plan a list of all the potential challenges that could occur and then agree on how to best mitigate each risk before they have a chance to strike.
2. Ensure continuity
Maintaining continuity of supply is a big concern for OEMs when transferring their entire operation across to an EMS supplier. With this in mind, it is good practice for your EMS provider to have access to - and utilise - as much of your existing supply chain as possible in the early days, as a way of promoting consistency. This way the number of overall variables is kept to a minimum – which at this stage is a good thing. The source of raw materials remains the same and so, therefore, does the quality of the goods coming in. Furthermore, any stock liabilities that are already in place could, following agreement by both parties, be transferred across to the EMS supplier.
Appointing a small team to work with the EMS provider before, during and after the transition can be a very positive move. Their input will be integral to smoothing over any teething issues associated with build or supply chain and will help keep things on track as expected. The team should ideally include representatives from each department - engineering, supply chain and manufacturing - plus a team leader interface with senior management.
3. Build trust
Having said that, giving your supplier the appropriate decision rights where required is an important part of building trust in the relationship, so be careful not to micro-manage them throughout the process.
For example, they may decide to layout the assembly lines differently or work with a number of different raw material suppliers. While consistency is a crucial factor during the early stages, be careful not to stifle your EMS provider and lose out on the experience they have to offer when it comes to manufacturing and supply chain efficiencies. During your initial discussions define clear roles, responsibilities and communication channels so that you all know where the boundaries lie.
4. Be transparent, yet safe
Existing suppliers can sometimes feel threatened by the introduction of a new assembly partner. The first thought they will have is that they are going to lose the business you have given to them over the years. In many cases this simply isn’t true and often the "relationship" is transferred over; unless, of course, the EMS provider feels the quality, service or terms offered could jeopardise the success of your outsourcing venture.
To maintain productive working relationships throughout the project it’s wise to include your existing suppliers as early on as possible, and address any concerns they may have. Promoting an open, communicative and collaborative approach is important, but in order to protect the confidentiality of your project it is recommended you introduce tripartite non-disclosure agreements (NDAs) between yourself, your assembly partner and each of the major material suppliers.
5. Unearth hidden "secrets"
Although you are likely to have documented build instructions that you plan to send across to your EMS provider, don’t underestimate how much "local" knowledge will have built up over time in the heads of your production and test operatives. It may be difficult to tap into this "vault" of knowledge, so dedicate sufficient time prior to any transfer in extracting this information from your most experienced employees.
An effective way to unearth differences is to carry out audits of your build documentation in real time against a live build and your EMS supplier may well wish to join you during these. You may well be surprised how many steps of the process are actually skipped, replaced or ignored completely, compared to what is physically written down in your build instructions. Assuming that they are acceptable to you, if these adopted practices are not captured your EMS provider will assemble your product to the instructions you have provided; which could lead to manufacturing inefficiencies or a product that does not meet the requirements your end user has grown accustomed to over the years.
6. Keep sight of your outsourcing objectives
With a project of this size it’s important to remain clear on your original outsourcing goals. Defining business metrics is vital to successfully transferring your manufacturing operation to an outsourcing provider. Make time to hold regular review meetings so you can assess your progress against the original project plan. Putting a robust measurement strategy with specific milestones in place will ensure progress can be accurately and fairly analysed and will also help keep parties aligned throughout.
The physical transfer of your factory floor during an outsourcing venture can see issues surfacing for the first time that have not been anticipated or arranged for contractually. It’s only natural that some elements may take a little longer to complete - however, with a practical, transparent and robust plan in place, risk can be seriously reduced.
When researching suitable EMS providers it’s recommended you look to those that can demonstrate they have previous experience in supporting similar projects of a comparable size and complexity. Importantly, look to partner with EMS providers that can prove to you the outcome was a success and that the OEM has benefited significantly from their outsourcing strategy.