Posted on 03 Sep, 2015 by Neil Sharp
After weeks of carrying out research and refining your "shortlist" of potential electronics manufacturing services (EMS) providers to just a few, it’s time to start work on the request for quotation (RFQ) document. The structure and format of the document is likely to vary depending on the size of company, the complexity of the product range and how much of its manufacturing operation will be outsourced.
While you may be tempted to send out a generic RFQ document to each contract electronics manufacturer, in order to get some quick pricing back, this approach could cause issues further down the line. For example, if key pieces of data are missing from the quote pack or sections of the document are open to interpretation the process could stall. Worse still, assumptions could be made (by both parties), which only come to light once a final decision has been made - by which time it will be too late.
To improve the quality of the responses you receive back from the EMS companies and help you work through the process efficiently, here are seven points to consider for your next RFQ document.
1. Statement of objectives
Summarise what you expect from your outsourcing project, what it means to your company and what your ambitions are for the partnership in the short, mid and long term. This will help potential suppliers create a relevant proposal that is based on your company's own vision, while allowing them to demonstrate how they differentiate themselves from the competition in order to add value to your business.
2. Company background
What is your vision and how are you setting out to achieve this? Which market sectors are you focussed on today; are there others you are considering for the future? What does your product portfolio look like; do you have a range of very similar products utilising common components or do they vary greatly in terms of complexity? What is your market share and geographical reach?
It’s important to try and keep this information concise and to the point to avoid the EMS provider drowning in detail. They will, however, find this information useful when trying to gauge if they will be a good fit for your company.
3. Key contacts
Include the details of the person in charge of heading up the project, plus the names and contact details of whom submissions should be sent to and where to direct specific questions. Assigning a single point of contact is a great way to control the RFQ process - however, if there are technical queries that need addressing by another department, or the contact is away from the business, bottlenecks can occur.
Likewise, while having direct access to other members of the team can be advantageous to the EMS provider, you will need to clarify roles and responsibilities and ensure the flow of all communication is managed.
4. Capability requirements
The RFQ should contain detailed information about your company requirements - for instance, particular areas of expertise, qualifications and certifications etc. If your current manufacturing process utilises a specific piece of production equipment or process - for example, selective soldering or conformal coating - then you should make the EMS provider aware upfront.
Vendor questionnaires can be used to obtain the data and also serve well when it comes to quick comparisons between suppliers. However, as with the RFQ, make sure any questionnaire you send is tailored to the service being offered and if certain accreditations or processes are "nice to haves" then it makes sense to clarify this early with the EMS company.
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5. Service expectations
How much of your operation are you planning to outsource and how involved do you want the chosen EMS partner to be, for instance, in areas such as design for manufacture? EMS suppliers are constantly adding new and innovative services to their remit as a way of adding value, such as comprehensive test services, configure-to-order (CTO) and direct ship fulfilment. Some of these additional services could well be of benefit so it is often worth exploring the potential impact of these for your organisation.
Perhaps you are considering sourcing some, or all, of your own materials and free-issuing to the assembly partner. A decision such as this could influence how the EMS provider approaches the material element of your quote and if there is ambiguity over supply chain responsibility, you may find you receive very different quotes from what you believe to be similar EMS providers.
6. Response format and timing
Setting out a framework for how you expect quotations to be sent back will allow for a quantitative comparison between multiple potential suppliers. In this section, clearly state when the deadline for submissions is and the format you require. This practical information will avoid unnecessary hold ups due to misunderstandings. Not all of these will be relevant but some areas you may wish the EMS provider to include in the quote could be:
- Unit price
- Number of hours per product/assembly (split by resource type)
- Hourly rate (split by resource rate)
- Material cost
- Material margin
- Material handling fee (if applicable)
- Standard lead-time (split out by material and labour)
- Details of any non-recurring engineering costs
- Component/material liabilities (material excess/minimum order quantities etc)
In order for the EMS provider to submit the very best quotation, they are likely to want to know the following from you:
- Volumes (annual usage, order and call off quantities etc)
- Target pricing (a ballpark figure is often fine)
- Forecast demand (is there a stable run rate throughout the year or more of a seasonal demand?)
- Forecast quantity projection (what do years two and three look like?)
- Design registration/supported pricing (if you have already agreed some then it makes sense for the EMS provider to access this)
- Build standards (IPC-A-610 class 2/3 or perhaps you have your own manufacturing standards?)
- Confidentiality (are there any suppliers that you want the EMS providers to avoid making contact with at this stage?)
7. Terms and conditions
Include all of the terms and conditions that you would require to be incorporated into any future contract so that the prospective vendors can comprehend these when providing their responses relating to service levels, contract length, warrantees, renewal options, delivery penalties and payment terms etc.
A concise document that clearly sets out your requirements and expectations will attract accurate proposals from your EMS supplier shortlist and help to move you through to the next stage. While writing the perfect RFQ document may not seem like the most exciting part of the project, it forms the foundation of a well-managed project, which should ultimately allow you to make an informed choice so you can finally embark on your outsourcing venture.
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