Errors in EMS manufacturer OEM quote package pricing and sourcing costs

By Mark Zetter

6AM GMT your ECO transmits to your EMS provider. New engineering changes will impact purchasing and commodity management, production WIP and FGI with your EMS supply chain. BOMs and AVLs need updating, EMS scheduling needs to coordinate production and shipping.

But work issues pop up, people go to lunch, life happens. Emails remain in inboxes for hours, even days, without being acted on. Systems aren’t connected across EMS departments as promised or cannot process large BOM and component volumes, your ECO is accompanied by hundreds of other documents in various formats and your EMS provider becomes overwhelmed.

Even when EMS personnel and departments do act on your ECO there are countless opportunities for incorrect data input, lack of timeliness, and sub-optimal productivity efficiency impacting indirect labor workflow for your OEM program in your EMS supply chain.

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These opportunities for error and slow or lack of execution happen regularly. Every hour. Every day.

EMS providers talk about lean, Kanban, Six Sigma and other improvements, but these processes only impact less expensive EMS direct labor (on the production floor) where the EMS industry has already optimized costs.

[Production] Direct labor is a small fraction of EMS internal costs when compared to the amount in salaries EMS providers pay for their costly indirect staffing. Nowhere is this more evident than in the EMS provider’s statement of operations. I explain why, below.

Costly EMS provider indirect labor (IDL)

Below is a partial list of EMS provider manufacturing indirect labor roles (cost) that contribute to OEM quote pricing and ongoing customer program management.

Operations Manager
Manufacturing Manager
Process Engineering Manager
Test Engineering Manager
Quality Manager
Doc Control Manager
Manager, Program Management
Director of Materials
Purchasing Manager
Master Scheduler/Planner
…view extended list here

EMS provider statement of operations

For OEMs to better understand the scope of influence how costly EMS IDL not held accountable impacts OEM customer quote pricing and sourcing costs, first realize when EMS providers receive your quote package, the provider will focus on six key factors of their internal business requirements.

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