OEM review of EMS quotes during RFQ phase

By Staff

EMS_HandloadingBefore you begin your EMS request-for-quote (RFQ) processs, think about which EMS providers you want to be the bidders. Which providers do you prefer to engage? Larger OEMs might already have an idea of at least a few of the EMS manufacturers you want to participate in your bidding process.

Provided you have an adequate RFQ package, your RFQ process can then proceed relatively fast with three to five providers you move immediately into the final round before selecting one or more EMS partners best suited.

For many other OEMs and hardware startups or you’re new at this you might spend time doing research or use a third party to help you with it and look at considerably more providers, and look at the range from Tier-5 and -4 to Tier-1 contract electronics providers.

Its going to be in your best interest to understand how and where you and your company will benefit from outsourcing. This is an important decision for you as a company, and for you as a leader in this area because the better EMS decisions you make the more scalable your chosen outsourcing solution will be.

Make it count

As you proceed through your RFQ and selection processes look at each solutions provider carefully. Understand who they are. Break out your decision process into a couple of stages where you go from having 10 to 15 EMS providers down to three or four in the final round including ODM and EMS supplier quality and factory audits.

You’ll want to bring at least two providers into your final selection round because you want to maintain the competitive element in your process, plus this helps ensure your team does their due diligence.

Invest the time internally and talk among your internal functional groups. Let your team talk to each other about what they see as different companies’ strengths and weaknesses and strength and weaknesses they see in your own company.

And then negotiate the electronics services contract or master agreement or SOW before you award the business. Negotiations will always start out slow but be patient. Its important. The speed of contract negotiations eventually always speeds up before you know it.

Pragmatic approach to selecting EMS partners
RFP/FRQ best practices
OEM outsourcing calculator

Keep in mind if you don’t negotiate a contract before you award the business it can becomes a struggle. The philosophy of many OEM decision makers on this is you want to have everything in writing on paper and then you put it in a drawer. Ideally, you don’t want to look at it again because the moment you pull the contract out of the drawer its likely the lawyers are soon getting involved.

Also important throughout your RFQ process is that you connect at different levels within the EMS organization.

You and your team members need to be connected to your respective functional counterparts (i.e., materials, test, engineering, manufacturing, finance…) in the EMS provider(s) so you get their perspective.

Spend time on this and don’t rush it. Gather needed information in your discovery process where omissions or errors surface in EMS provider quotes.

Obtain as much information as possible so you can compare EMS provider quotations apples-to-apples.

Four types of contract electronics agreements
Due diligence metrics for contract electronics
Determining your total landed cost
Changing EMS partners when cost reductions are not working

Collectively, your company will obtain tremendous insights doing things this way. It will also yield the potential you’ll have for creating good working relationships so ensure your team meets with theirs.

For OEMs with technologically advance product programs, be absolutely certain your research and development teams have ample opportunity to connect with their EMS counterparts. These members of your team are best situated to see which EMS providers are able to bring more advanced technology capabilities to the table from a new product introduction (NPI) perspective.

Lastly, when performing OEM-EMS negotiations, if you’re the final decision-maker your best take away from this article is don’t do the negotiations yourself. Instead, position yourself as tiebreaker having the final word.

This way, whoever you designate for negotiating and targeting your cost reductions on your firm’s behalf will likely get 90% of the contract service terms completed. You then can negotiate the remaining 10% fairly quickly between yourself and your EMS counterpart.

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