Posted on 27 Mar, 2015 by Neil Sharp
If you've already completed an initial analysis of your own manufacturing operation and are now considering outsourcing to a contract electronics manufacturer (CEM) there are probably a number of questions that you would like answers to. The main ones are likely to be ‘what should I do next?’ and ‘how long will it take until we can expect to reap some of the rewards?’
How long it takes to start seeing the benefits when outsourcing electronics manufacturing varies from business to business as it really depends on your company's specific goals and how you work as an organisation. But, generally speaking, it could take anything from four to nine months.
With regard to the first question about what to do next, here is a step-by-step look at what you will need to do to get your outsourcing aspirations off the ground plus an idea of the timings involved.
Assemble your team: 2 – 4 weeks
Your outsourcing team should comprise of specialists from across the company including engineering, quality, manufacturing, procurement and even HR. A project manager should be assigned to coordinate and drive activities and keep the venture on track and you will need a board level sponsor to ensure that the project has their support. With diaries often booked up well in advance, it may be a challenge to rally those involved so you should probably allow up to a month to have everyone in place with sufficient time available to invest in the project.
Agree the objectives: 2 – 4 weeks
With your team in place, objectives can be set. Ask the big question: "How much of our operation will we need to outsource in order to achieve the benefits we want?" Aligning your team to the same set of goals and objectives is an important part of outsourcing success. It might take another two to four weeks to collate everyone’s feedback, but it will help with future decision-making and streamline activities in the long-run.
Research potential suppliers: 2 – 4 weeks
Trawling through the internet is one way to draw up a list of suppliers, but it can be a laborious task. Asking industry contacts for recommendations could be a more effective way of identifying candidates. Always refer to your goals and objectives to define exactly what you are looking for, for instance in terms of location, company culture and capabilities. This will help focus your efforts and avoid wasting hours researching companies that are unlikely to make the grade. The idea at this stage is to come up with a shortlist of four or five likely candidates for further scrutiny.
Refine your shortlist: 6 – 12 weeks
Sending your shortlist of potential candidates a preliminary questionnaire is a good way of narrowing it down even further. A short questionnaire can help determine which candidates are a good fit and which might be a mismatch for your specific requirements. Once you are down to two or three suppliers, you'll then need to allocate sufficient time to conduct site visits.
These should be comprehensive visits where you speak with the key people who will be responsible for manufacturing your products. You should seek to understand their processes, their purchasing and supply chain management capabilities, how they deal with design changes and demand fluctuations, as well as the quality of their plant, equipment and employees.
In addition you will most likely have request for quotations (RFQs) to issue in order to gauge price competitiveness as well as references to follow up and financial checks to make. As you narrow your final choice down to a single preferred partner, you will need to allocate time to drawing up terms and conditions documents, non-disclosure agreements, risk assessments and contracts.
It could take a few months to find the company that suits your needs the best. But, thankfully, it's a process you should only need to go through once.
Transfer your operation: 6 – 12 weeks
Now that you have chosen your CEM partner the transfer of production can begin. This is where the activity really ramps up. One of the first considerations when tackling this phase is how to deal with your existing material suppliers. Whether you are going to transfer some or all of your current supplier relationships to your new partner you will need to work closely with them throughout to ensure continuity of supply.
The smooth transfer of knowledge and resources will also play an important role during this phase. It would be advisable to make sure your assembly and test instructions are well documented. And, if members of your staff have in depth knowledge of building your products which are not yet documented, you need to consider how you will pass this information over to your CEM provider.
Although your new assembly partner will have a wealth of contract manufacturing experience, your knowledge may be beneficial to them at the outset so be prepared to share it. However, don't be concerned if they plan to lay out their operation differently or change the process somehow. They will be looking to build in efficiencies learned from years of building complex products similar to yours.
Complexity and scope are the determining factors
The complexity of your project and your requirements will determine how long the entire process takes. For example, If you are looking to outsource a single printed circuit board assembly (PCBA) and free issue the material, then you could be up and running fairly quickly, perhaps as soon as three to four months.
If, on the other hand, you have made the strategic decision to outsource your entire manufacturing operation, including complete supply chain responsibility, full system build, machinery and staff transfer, along with direct shipments to your end customers, then it will, not surprisingly, take longer. For large scale outsourcing projects don’t be surprised if the whole process takes 12 months or more to complete.
How long before I see results?
There are many that benefits outsourcing to a CEM can deliver to your organisation. The ones that matter to you the most depend largely on the objectives you established at the outset. But whether you are seeking improved on time/in full delivery rates, OPEX or CAPEX reductions, increased capacity to support market expansion, the ability to focus more on product development, or one of the other many positive outcomes that can be realised through outsourcing, the fact is they won’t be realised overnight.Fortunately, much has been written on this subject and a lot of information is available to you surrounding the critical stages associated with the outsourcing journey. The key is to plan your strategy well from the outset and you could experience the rewards sooner than you think.
Image by: Matthew