Top ten (10) factors impacting EMS/ODM quote pricing for OEM electronic equipment outsource manufacturing programs

In nearly every instance of the OEM program engagement, the EMS/ODM supplier wants to maintain a minimum, visible posture related to pricing, and negotiations, presented to OEM prospects (and existing OEM customers) — all based on EMS/ODM markups (profit).

By Mark Zetter

The following pertains primarily to tier-1 and tier-2 EMS and ODM factories across several manufacturing regions with multiple manufacturing factories and economic (currency) regions, globally, and includes aspects of the OEM customer and EMS/ODM supplier relationship. (READ: How to drive cost out of your manufacturing product portfolio)

1. Local factory cost basis and SMT/PCB assembly line phases and workstations.

2. Workstations for each factory has contributory labor costs, including direct labor, indirect labor, F(Factory)G&A, S,G&A and commissions.

OEM contact manufacturing cost model templates for sourcing EMS/ODM services
OEM Checklist during RFQ phase for EMS/ODM manufacturing
Contract agreement development and negotiations (PDF auto-download)

3. Regional and local labor is further broken down into definable variables, local benefits and costs.

4. Local factories are influenced by currency and forex variables.

5. Fees for pipelining materials and components, sub-contracting, consumables, freight-in, storage, production, logistics.

6. Costly indirect labor and related engineering, logistics, production, program management, quality/TQM, facility, reverse accruals for G&A, and more.

7. FG&A: This includes factory general administrative costs like freight out, supplies, utilities, energy, P,P&E, insurance and more.

8. SG&A: This includes sales general Administrative costs, to include staffing and activities OH for sales, business development, account executives, business unit managers (does not include costs for manufacturing reps).

OEM customer & EMS/ODM supplier business model and relationship

9. Metrics can be applied by OEM customers to isolate and identify how and where EMS/ODM factories ‘charge back’ all aspects of program labor, materials and related costs, facility time use, space use, cost or ‘value’ for quality services provided.

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10. In nearly every instance of the OEM program engagement, the EMS/ODM supplier wants to maintain a minimum, visible posture related to pricing, and negotiations, presented to OEM prospects (and existing OEM customers) — all based on EMS/ODM markups (profit). Popular EMS industry quoting platforms and software won’t be inclusive of items 1 through 10 above because they are always designed and administered with best interests of the vendor/supplier in mind, not OEM customers.

Our contract manufacturing cost templates are designed with OEM decision maker best interests in mind so that you can manage the narrative and discuss pricing and conduct negotiations with EMS and ODM suppliers on equal footing.

In fact, users of our manufacturing cost models often have more insight into EMS and ODM factory cost and quote (price) drivers than most EMS and ODM executives do today.

Request custom manufacturing EMS/ODM templates to help OEM professionals identify EMS/ODM profit areas and, help OEM decision makers sourcing EMS/ODM services to drive more informed contract negotiations and lower fees (pricing). Purchase below or, read more here.

Handbook of EMS/ODM manufacturing factory multi-national pricing and cost drivers

Purchase our detailed, contract manufacturing handbook for EMS/ODM internal costs and pricing drivers that impact OEM quotes (fees), below. Alternatively, read more about our handbook, here.

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