Posted on 07 Apr, 2016 by John Mayes
After you’ve chosen to outsource to an electronics manufacturing services (EMS) provider, there is another important decision to make. Do you transfer management of your existing supply chain to your prospective EMS partner or do you allow them to choose your suppliers on your behalf?
Many EMS suppliers are happy to work either way, so it really is down to you to make a decision.
It can seem a daunting prospect to let your partner choose for you. After all, you are already placing a lot of trust in them by outsourcing in the first place and it may feel like too big a step. However, many original equipment manufacturers (OEMs) do decide to take this route and, actually, find that it works very well for their organisation.
From a cost perspective, it doesn’t make sense for an OEM to maintain its own procurement team alongside the EMS provider’s operation. Furthermore, the more of its manufacturing operation an OEM outsources, the more time it will have to spend focusing on its core competencies - i.e. designing and selling.
But, of course, an EMS supplier needs to demonstrate its reliability before you entrust them with greater responsibility. In this blog post, we will consider how you can evaluate the quality of your potential partner’s supply chain operation.
It is relatively easy for an OEM to determine whether an EMS provider has a reliable supplier base, as reputable ones usually have long-standing relationships with their suppliers. For specialist commodities they tend to choose suppliers that have an intimate understanding of the market; are capable of producing a wide range of products; and can cope with peaks and troughs in demand. It's a good idea to talk to these companies and gauge an honest picture of their relationship with your chosen partner - and their capabilities.
So how do EMS providers find these companies in the first place? Most will have procedures in place to check the capabilities of prospective suppliers. Methods may vary, but the most common processes will range from potential suppliers completing commercial and quality questionnaires, to a detailed validation of quality standards and performance, plus a formal audit visit.
Potential suppliers must illustrate that they understand the right combination of methods appropriate for each end product and the components being bought.
Ongoing performance measurement
To feel fully confident in your EMS partner’s ability to choose the right suppliers for your products, you will want to know how they assess their suppliers’ performance on a regular basis.
Good EMS providers should be able to demonstrate that their suppliers are monitored using objective measures, related to quality, delivery, cost, and other factors - plus, where appropriate, action plans should be put in place to improve performance.
Understanding how an EMS provider might purchase components on your behalf is a useful exercise in judging their buying efficiency. Some EMS suppliers will create new component part numbers for each customer or product, which can result in the same physical component being bought under different part numbers. Often, it is impossible to tell whether the same part has been bought more than once. This method can be very inefficient as parts may not be bought from the same supplier; there may be different prices; and even varying quality levels.
A more effective method is a commodity type approach that considers, and then groups, all parts of a similar nature, regardless of the customer or the product (however, these may be taken into consideration if there are differences in specification or quality requirements).
A significant number of EMS providers now employ buyers with specialist skills that focus on particular commodities. For example, they may have a single person purchasing sheet metal for all of their clients. There are many advantages to this approach, including: the development of deep expertise in the commodity itself; applying purchasing economies of scale; and possessing the breadth and depth of market and product knowledge to understand, anticipate and deal with a range of potential issues including fluctuations in price and availability.
When outsourcing to an EMS provider, you have to decide whether you will allow them to choose their own suppliers. This is a big decision to make and shouldn't be taken lightly. However, the best EMS suppliers will have in place robust and dependable supply chain operations upon which you can rely. By transferring this additional responsibility to your chosen EMS partner, you are freed up to turn your attention to what you do best: designing and selling great products.