Posted on 01 Dec, 2016 by Neil Sharp
In a previous post, we talked about successfully managing the partnership between an original equipment manufacturer (OEM) and an electronics manufacturing services (EMS) provider. We discussed the importance of fully committing to an outsourcing initiative and of establishing clear lines of communication between both partners.
But there are risks and sometimes outsourcing can go wrong. One of the most famous examples in recent years is that of aircraft manufacturer Boeing. After the company outsourced the build of its 787 Dreamliner to various suppliers, it was besieged by problems that put its roll-out three years behind schedule.
An article written by Steve Denning, a contributor to Forbes, suggests that, while the company fully embraced the outsourcing concept, they managed certain elements of their relationship from a distance. As an example, instead of encouraging face-to-face dialogue, they asked their suppliers to enter progress updates into a web-based communication tool. Many suppliers failed to input accurate or timely information, which meant production problems were not identified in time, leading to build delays. And, rather than providing on-site engineering support (on a new and unproven design), they delegated responsibility and coordination for engineering and technical problem solving to their sub contract partners. With the Boeing 787 being an extremely complex product, this failed to happen and Boeing ended up having to send in hundreds of engineers anyway. This resource had clearly not been planned or costed originally, leading to additional delays and expense.
This is the kind of situation that both OEMs and their assembly partners want to avoid – after all, a true partnership should deliver benefits to both sides. In this post, we will consider three reasons why the OEM/EMS provider partnership might turn sour.
1. Choosing the wrong partner
This might seem obvious, but it is nevertheless a real risk. Choosing an EMS partner is not to be undertaken lightly. You should take the time to investigate their capabilities and their overall "fit" for your organisation. Ultimately, the success of your partnership depends on your compatibility.
Initially, it's best practice to send out a questionnaire to establish a good, far-reaching picture of your potential partners. Once you've drawn up a shortlist, there's no substitute for a site visit. This will allow you to see your potential EMS suppliers in action and to meet the core people who would be involved in your outsourcing venture face-to-face.
Once you've sent out your request for quotation (RFQ) documents, you can then spend time carrying out additional audits and checks, in order to make a final decision.
All of this takes time, so it's important to be patient and not try and speed up the process. In this way, you increase your chances of choosing the perfect partner.
2. Not establishing clear objectives
As an OEM deciding to outsource, you have key goals that you want to achieve. These might include: acquiring more time to focus on product design, marketing and selling; freeing up warehouse and production space; cutting costs; or a combination of factors.
Your goals will determine the nature of your outsourcing initiative and enable you to establish clear objectives. Therefore, it's vital that everyone is on the same page – from your own board, through to the EMS provider's workforce. A departure from your goals - even if unintentional – will soon leave you feeling frustrated.
Your objectives should be established in your contract and there should be a defined path forward, to ensure that these are met on time and to both parties' expectations.
Furthermore, it's no good starting off on the same page if you subsequently meander off in different directions. However well you've planned your outsourcing project, it will soon break down if it isn't constantly monitored. It's important to establish strong lines of communication that are well-maintained.
3. Playing it too safe
We've said it before and we'll say it again – the best outsourcing relationships are built on trust. You might think that playing it safe in the beginning is the best option – for instance, you start by outsourcing PCB assembly when what you really want to do is outsource an entire product assembly.
However, if you've put in the groundwork, there's no reason not to climb as far as you had originally planned up the outsourcing ladder. A good EMS supplier will work with you every step of the way to fulfil your objectives and deliver the high value that you expect.
In fact, you will likely find that the more "risks" you take, the more value you accrue. Of course, with the right EMS provider, we are not talking about true risk - but the willingness for your organisaiton to fully to your outsourcing project. Why not read our post, Outsourcing your manufacturing? Don't overlook outbound logistics, for a more in-depth look at how handing over more responsibility to your chosen EMS partner can deliver further savings and efficiencies.
Outsourcing to an EMS provider should bring innumerable benefits to an OEM. Unfortunately, sometimes things go wrong. To avoid cracks in your relationship with your EMS supplier, it's not only crucial to choose the right one in the first place, but to work hard to nurture the partnership and to trust in your meticulously made decision.