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Product cost control and cost reductions in electronic OEM contract EMS manufacturing supply chains

By Mark Zetter

There is no standardized manner for how contract EMS manufacturers determine pricing of fees they charge for services they provide to OEM customers.

There are many common practices used by EMS providers in industry when revealing (disclosing) quote pricing and fees to OEM decision makers during the RFQ/RFP quote phase, but ‘actual’ EMS internal costs are never revealed or accurately determined.

One of the big challenges OEM companies face when negotiating EMS contractual pricing to better control product manufacturing costs in EMS factories is determining (discovery) the actual, internal costs incurred by EMS manufacturers to execute your OEM program.

Advanced costing mirrors EMS industry logic

Our EMS manufacturing cost modelers capture the trends in EMS manufacturing pricing of services and, mirror the EMS business environment in which EMS manufacturers make their pricing decisions.

And because we do this better, and more accurately, than EMS manufacturers are capable of doing themselves, we help OEMs identify opportunities and get you on the right side thus allowing you to negotiate EMS program pricing, fees and cost reductions from a position of strength.

Contrary to what many EMS industry professionals may claim, many do not understand that EMS pricing of fees does not come out of a vacuum. There are many extraneous factors, important factors. EMS firms may look at these factors but do not know how to assign weights and values.

This is critical and one of the most important aspects when determining EMS internal costs and associated risks.

And, one of the most important points for evaluating EMS pricing is being able to discern initial conditions – actual, internal EMS costs. EMS manufacturers not only don’t know their true internal costs, they often arbitrarily inflate whichever costs they do claim to know.

OEM decision makers need to understand the initial EMS manufacturing factory conditions and, you need to understand the pricing drivers and weights.

Venture Outsource has many years of training and understanding how to set up and run EMS business models and we have processed thousands of EMS quote packages for OEM customers.

Our manufacturing cost modelers address many thousands of formulas for pricing and cost functions of internal EMS factories, EMS business models and, various OEM program types ranging from simple PCB and PCBA to large, complex electro-mechanical assemblies.

Functions include OEM program inputs, EMS factory roll-ups and internal costs, EMS profits and markup details, EMS asset classes, F,G&A to name a few.

Our manufacturing cost modelers cover many thousands of formulas for pricing and cost functions of internal EMS factories, EMS business models and, various OEM program types ranging from simple PCB and PCBA to large, complex electro-mechanical assemblies. Functions include OEM program inputs, EMS factory roll-ups and internal costs, EMS profits and markup details, EMS asset classes, F,G&A to name a few.

We have a proprietary understanding of what’s important and what’s not and, we never lose site of the initial conditions and objectives of the OEM-EMS program engagement.

We have created the standard for discerning accurate pricing of EMS manufacturing services and fees. We’ve also done a great deal of hypothesis testing to sort out valuable EMS manufacturer pricing practices from EMS manufacturer pricing practices that do not matter.

Comprehensive, customizable, expandable

EMS manufacturing product cost control with customizable and expandable cost modeling, with training.

Each client is thoroughly trained on cost modeler capabilities and identification of EMS internal program costs and excesses in EMS quoted pricing and fees vs your targeted OEM total landed costs – with a clear path to cost modeler project ROI.

Our proprietary EMS industry knowledge of all EMS industry market counterparties, combined with our manufacturing cost modelers, create effective tools for OEM manufacturing decision makers to better understand EMS manufacturing and hedge against risk in EMS manufacturing supply chains. Learn more and request white paper here.




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OEM Checklist for EMS Manufacturing Quotes

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