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Outsourcing Calculator for OEMs

When offshoring manufacturing to low-cost regions, in addition to OEM executives considering how lower labor rates savings contribute to the bottom line, the biggest cost for most OEMs engaging electronics contract manufacturing partners is their materials cost of goods sold (MCOGs) for products being manufactured.

Whether outsourcing or offshoring product manufacturing, the Outsourcing Calculator can help OEMs uncover and lower costs, and potentially increase OEM savings, as you evaluate EMS and ODM companies in low-cost and other manufacturing destinations. (Read Disclaimer before using the Outsourcing Calculator)

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EMS Resources Directory
Matching service to help OEMs find EMS/ODM partners

 

Instructions: Input cost and rate variables in fields below. Press ‘Calculate OEM Savings’ to display results. Change variables to see how different scenarios impact your business.

Clear Fields

* Indicates required field.

OEM INTERNAL FIGURES
?  $ *
ANNUAL cost of materials required for product / program.
?  $ *
OEM fully-burdened direct labor hourly rate (average).
?  $ *
Determine OEM internal cost rate per hour from items such as direct and indirect labor, utilities, supplies, square foot or meter overhead costs, additional space required, rents which the OEM will not be paying for because it will be outsourcing.
(Working backward: use above costs to determine hourly savings based on ANNUAL hours to build and ANNUAL number of units forecasted / to be manufactured)
?  *
ANNUAL direct labor hours required to build product / program.
?  *
ANNUAL number of units forecasted / to be manufactured.

MCOGs SAVINGS (%)
?  % *
Based on discussions with contract manufacturer: enter percentage amount contract manufacturer indicates he can save the OEM on procurement of MCOGs if / when contract manufacturer absorbs OEM procurement responsibilities.

CONTRACT MANUFACTURER'S FIGURES
?  $ *
Direct labor hourly rate per the contract manufacturer.
?  % *
Material mark-up (%) per the contract manufacturer.
?  % *
S, G & A (%) per the contract manufacturer.
?  % *
Profit (%) per the contract manufacturer.

Please correct the fields highlighted in RED and resubmit


COST RATE / HOUR COMPARISON
$ 62.00
vs.
Contract Manufacturer $ 49.71

OUTSOURCE MANUFACTURING COSTS
Direct Labor Hourly Rate $ 552,750.00
Material Mark-up $ 4,950,000.00
S,G & A $ 1,800,000.00
Profit $ 900,000.00
Total Outsource Cost $ 8,202,750.00

OEM SAVINGS
Cost Rate / Hour Savings $ 12.29
?  $ 2,027,250.00
?  $ 3,150,000.00
Total Annual Savings $ 5,177,250.00
(OEM Cost Rate / Hour Savings) x (OEM Direct Labor Hours)
ANNUAL amount contract manufacturer will save the OEM on materials cost vs. ANNUAL cost OEM would incur for procurement otherwise.

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