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Should cost analysis: How contract electronics manufacturing services price OEM quotes

By VentureOutsource.com Staff

Savvy OEMs can benefit knowing how contract electronics services providers determine pricing for better understanding provider quotes during the RFP/RFQ process. Performing should cost analysis for electronics services involves understanding how contract manufacturers turn what is typically considered a cost center – into a profit center. (READ: How to drive cost out of your manufacturing product portfolio)

From one electronics services case study, we share partial information below from an actual OEM program running three shifts with global program management and distribution and taking into consideration procurement and pipelining materials in-house to the contract manufacturer for SMT, PCB assembly and electro-mechanical assembly work, including configure-to-order box build, pack out and shipping.

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The intended benefit here is to show OEMs ways some electronics services providers justify internal costs (read: pricing) based on the contribution of OEM-program supported provider costs and salaries of functional group personnel. Various links throughout this article direct readers to relative, helpful information to provide further knowledge in that area.

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This study begins with estimated revenue from the OEM program equal to $9,375,000, followed by other internal contract electronics provider cost considerations (list for reader appreciation), and detailing gross margin and other program financials for the electronics provider.

Revenue

$9,375,000

Other Materials Costs*

Freight-in (% of sales)
Inventory Reserve (% of Material)
Warranty Reserve (% of Sales)
Material Shrinkage (% of Material)

Manufacturing Direct Labor Costs
Manufacturing direct labor costs for this case study came to just under two percent.

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EMS Factory Cost vs OEM Quote vs OEM Target Price

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