Tools for EMS manufacturing quote pricing analysis - Optimize total landed cost savings for your contract electronics outsourcing programs

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Tools for EMS manufacturing quote pricing analysis - Optimize total landed cost savings for your contract electronics outsourcing programs

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EMS Provider perspective: Managing end-of-life (EOL) product lifecycle management (PLM)

By VentureOutsource.com Staff

EMS providers complain often about thin operating margins – their fall back position when OEMs ask for ongoing cost reductions. The truth is EMS firms large and small have lots of excess cash tied up in supply chain operations because they’re not good at being money managers and efficiently managing EMS direct and indirect labor productivity.

Add to this OEMs who outsource have little motivation to manage every dime paid to EMS providers because by eliminating their factories, related assets and manufacturing employee overhead, the money OEMs save by outsourcing far exceeds any total fees paid to EMS providers for contract electronics services.

 

SEE ALSO
Difference between OEM and EMS company types
Best practices for EMS industry request-for-quote (RFQ) process

 

EMS provider ‘group think’ eclipses savvy EMS financial restraint resulting in EMS providers coming up with more ways to justify charging customers. The above does not necessarily mean EMS providers can’t manage their business properly or, OEMs don’t care what fees they are charged for outsourcing services.

What this does emphasize is that EMS program management must work hard with internal EMS departments to identify and line-item OEM program pricing, engineering change orders (ECO) and non-recurring engineering / expenses (NRE) for eventual OEM reimbursement.

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In your search results, you can further target EMS options by choosing other Industries and/or Services.


Below is an EMS provider’s approach to contract management of an actual OEM’s end-of-life (EOL) program. Details that follow highlight EMS group think, how different EMS functional teams pull together and see opportunities for charging OEM fees to drive more EMS revenue.

EMS provider assumptions and concerns per EMS functional group

In the best case scenario, all conceivable EMS services and related capabilities / items here would be included in the MOU or service level contract agreement provided to the OEM. In this actual scenario the EMS provide winning this program is also taking on work from an existing EMS provider unable to fulfill its EOL responsibilities previously contracted with the OEM.

Process engineering

  1. OEM agrees to propose and support the implementation costs of the optimum production line layout; including, but not limited to, power requirements, equipment layout, dry-box installation, solder stations, lifting boom devices, and in-process product storage and handling.
  2. OEM agrees to surplus for EMS provider’s disposition all equipment such as benches, floor matting, ESD materials, solder stations, chairs, and lighting and wiring devices furnished in support of this task. EMS Provider to retain all previously-owned OEM equipment, except for test stations, in support of the business, following project completion.
  3. OEM to provide daily ‘on-call’ process engineering support, 7a – 4p…first 14 calendar days of EACH program transition into EMS provider, following completion of EMS provider box build set up.
  4. OEM agrees to transfer, procure, or authorize EMS provider to procure all necessary test equipment, box build plus related equipment, tooling, fixtures, bins, boxes, pallets, storage cabinets, and other handling equipment to accomplish the tasks assigned.
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