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Everything you need to know about program management for outsourcing electronics manufacturing

By Mark Zetter

Stop losing money with bad materials management. Learn what’s important to contract electronics manufacturing (EMS) providers in OEM-EMS relationships and manage manufacturing supply chain operations more effectively.

 

Are you a technology OEM project or program manager managing a contract EMS partner? Perhaps you’re an EMS program manager managing OEM product accounts?

If you answered yes to either question, give yourself a raise for the challenging work you do. Then, give a shout out to your OEM and EMS project and program management peers because this article is dedicated to each of you.

Its of little surprise to decision makers responsible for outsource manufacturing strategy and supply chain performance that sound management of materials purchasing and materials cost of good sold (MCOGs) are important areas technology companies allocate a great deal of focus.

In fact, electronics materials management and optimizing the management of functional groups supporting technology manufacturing are both so important that numerous companies (and entire industries) have emerged eager to help improve your company’s tracking and management effectiveness in these areas. Think: software vendors specializing in ERP; PLM, SRM, CRM and sales and operations planning (S&OP), financial planning and analysis (FP&A) …

 

Expand your provider search

 

Invest in your career
By carefully reading through this article and closely examining the link content located throughout, you will understand 90 percent of what being a program or project manager in the electronics industry is all about.

 

READ
Thinking of re-shoring electronics manufacturing? Read this
The 4 types of contract electronics manufacturing agreements
More about program management
More about EMS contracts and negotiations
OEM Outsourcing Calculator
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Providers: List your company in our directory

 

Getting started
The following examples are from recent, actual working engagements with program management teams inside EMS providers. Engagements focused on improving program management sense of urgency while paying closer attention to managing the profit center in OEM customer programs.

This article salutes program managers everywhere. As decision makers in the electronics industry you already hold some of the cards directly related to your company’s success. We want to reward you with another type of card, here.

This article reflects the perspective of a senior EMS program manager helping other EMS program management staff within an EMS provider set strategy for effective EMS programs and materials management of OEM customer accounts.

 

Manage OEM quotation packages
EMS program management obtains the most relevant (and current) BOMs for all assemblies which are then used for:

  • Calculating monthly [$] material demand
  • PPV analysis
  • Creating and managing leadtime charts based on findings
  • Determine critical or allocated parts

 

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In your search results, you will be able to further target options by choosing 'Markets', then selecting Go.

 

OEM orders and forecasts
EMS program management collects details for current OEM orders and current forecasts which is used for:
1. Check against ERP and work or purchase orders
2. Verify material lined up to support orders and forecasts
3. Calculate monthly [$] materials demand
4. When ordering against forecasts advise program management of material liability

  • Ensure material is underwritten by customer
  • Do not order materials against forecasts if it is not underwritten by the OEM. Requests must be seen in writing / email. Verbal requests are not sufficient, either from program management or from the customer

 

New OEM orders from existing programs
EMS program management supplies EMS purchasing copies of all new orders which are then used to:

  • Check raw materials pricing (costs) and requested vendor delivery dates
  • Compare with forecasts, advise materials of implications of any mismatches
  • Confirm orders are consuming the forecast
  • Status critical parts and long leadtime items
  • Within two (2) days receiving orders, advise program management of anticipated start date for the order
  • Ensure order is entered into system in-line with start date before actioning ERP
  • Measure performance against agreed on completion dates from program management, planning, and manufacturing

 

Rescheduling
Treat OEM reschedule requests similar to new orders, taking the following actions:

  • Compare existing date with new request date
  • Schedule pull-ins: status material and advise a start date
  • Schedule push-outs: calculate the value of inventory being held
  • Get appropriate EMS functional groups in decisions whether to charge inventory carrying costs
  • Respond to reschedule requests within two (2) working days

 

 

 

 

Find manufacturing services
Go

In your search results, you will be able to further target options by choosing 'Markets', then selecting Go.

 

Engineering changes
Engineering changes can typically involve replacement of one component / part with another. In such instances take the following actions:

  • Status the price and availability of the replacement (new) part
  • Status the stock-on-hand and the stock-on-order of the deleted part(s)
  • Advise program management of new part cut-in date, any obsolescence costs

 

Then submit new BOMs to program management, who then submits new quotation(s) to the OEM along with an effectivity date. Again, make sure you receive revised customer orders for assembly work plus any obsolescence costs.

 

 

Nothing decreases an EMS provider’s profit more than negative PPV.

 

 

Managing materials stock and inventory turn ratios
Inventory turns are calculated for each OEM program taking the next three months material demand and dividing that number by stock-on-hand for that program, then multiplying by four. (months)

Actual example #1 for industrial OEM NPI-to-production program (not ramp-to-volume)

 

RAW MATERIALS STOCK: $608,751
WIP STOCK: $682,773

Materials total = $1,291,524

 

Looking at the value of materials demand forecast

MONTH 1: $914,430
MONTH 2: $1,235,432
MONTH 3:  $1,485,465

Forecast total = $2,720,897

 

WHERE: $2,720,897 / $1,291,524 = 2.1067 x 4 = 8.42 TURNS

 

For the above, you are currently turning stock for this OEM program 8.42 times in one year. Yet, you have 9.22 weeks of inventory stock.

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