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Look beyond labor and S,G&A for contract manufacturing quote cost models to determine total landed costs

How OEM customers can accurately re-calculate EMS and ODM quote pricing faster than EMS and ODM quote teams.

By Mark Zetter

Finding manufacturing ‘should cost’ and lowest total cost of ownership (TCO) versus piece part pricing for OEM equipment manufacturers requires intimate knowledge of EMS manufacturing and ODM provider internal costs. Add to this, the various geographies and currency rates while trying to compare piece part prices through to total landed costs can be a nightmare for any quote team.

EMS manufacturers and ODM providers pad their quotes, thinking they are quantifying your pricing, but its been my experience EMS and ODM firms do not properly measure internal costs.

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Venture Outsource has a proven, methodical approach that takes into consideration EMS and OEM ERP, product quote specs, materials cost of good sold (MCOGs), EMS factory direct and indirect labor, comprehensive S,G&A (along with Factory,G&A) contributors supporting production plus, with complete transparent financial formula calculations to satisfy even the most hardcore manufacturing finance executive.

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In your search results, you can add more Industry End Markets, more Services plus, you can add more Geographies.

Our outsource manufacturing cost models allow OEM decision makers to drill down into EMS and ODM factory costs during your RFP/RFQ phase, helping OEMs to identify hidden EMS/ODM margins and ‘should cost’ for your outsourcing programs – which are then be used to highlight discussion during EMS and ODM contract negotiations for your product design manufacturing supply chain service level agreements (SLA).

Our cost models can be adjusted to ‘n’ program volume/lots minimum order quantity (MOQ) circumstance (most common) and include features to help manage EMS warehouse, production floow (WIP) and FGI storage costs against fixed forecast pricing tied to often fluctuating OEM program production volume peaks and valleys.

OEM professionals with a good understanding of contract manufacturing production processes and terminology are able to use our cost models with confidence, able to select phases or processes tied to specific changes in program scope, and resulting in immediate ‘should cost’ pricing when comparing EMS quotes and re-quotes submitted by EMS partners.

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Today, using our manufacturing cost models, OEM sourcing professionals can re-quote an EMS quote faster (OEM internal), more accurately, and in a manner several degrees higher in quality than most EMS provider quote teams are able to perform. I try not to be too cynical when evaluating EMS and ODM quoted costs (pricing) presented to OEM customers, but in my opinion the vast majority are laughable.

Most EMS and ODM companies do not know how to determine internal costs supporting manufacturing production operations. EMS and ODM firms are double-dipping, even triple-dipping – shrouding hidden margins – which they pass on to OEM customers in excess fees. Our cost models help OEM teams see through the fog with reliable, actionable data.

Many OEMs sourcing to EMS providers end their week, month, and quarter with unknown inventory when demand dips, yet only partly its because of inaccurate forecasts.

Then when rev changes occur or regulatory changes (such as FDA) someone faces a write-down or write-off. When in fact, some EMS providers will take this excess raw material/inventory and re-sell it to someone else.

OEMs can better manage against these concerns, and more. We can help. Learn more here.




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EMS Factory Cost vs OEM Quote vs OEM Target Price

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