Outsourcing your procurement, assembly, test and logistics to an Electronics Manufacturing Services (EMS) provider can be a complex process. It’s not a decision to be taken lightly and depending on the size of your company, can take anywhere between 6 and 36 months to implement.
So, we won’t be covering outsourcing in any great detail in this week’s blog post. But that’s ok because there are really only a handful of elements you need to get right to guarantee your outsourcing strategy becomes a success.
Rather than viewing outsourcing as a way to offload unwanted tasks, Original Equipment Manufacturers (OEMs) should spend time carefully selecting and then maintaining a properly managed relationship with their chosen EMS partner. Here are 5 simple elements we recommend you focus on before, during and after an outsourcing strategy to guarantee it is a success.
1 - Choose your partner carefully
Ultimately, outsourcing product manufacturing should improve business performance. OEMs should therefore spend a considerable amount of time evaluating potential partners. In addition to ensuring that your immediate production requirements can be fulfilled successfully, you should also look for demonstrable expertise that the assembly partner can manage your supply chain effectively, improve processes and production, and respond to future changes. Savvy OEMs tend to focus on these aspects rather than looking for the lowest cost proposal. But supplier selection is only the first part of the work that OEMs should expect to do if outsourcing is to deliver its full potential.
2 - Verify your data
Before any outsourcing project can begin, both companies must work to ensure that manufacturing can transition seamlessly to the EMS partner without suffering delays or process-transfer problems. Typical challenges can include lower than expected initial yield, which usually occurs when critical information has not been documented and therefore not included as part of the original product build information. Rushing the handover can encourage these types of problems which is why you must ensure that your manufacturing partner has enough information to both quote and build your product correctly.
Ensuring up-to-date documentation as part of a fully detailed build pack is the most important first action for any new outsourcing partnership. Other important handover activities include checking that your BOMs have been correctly interpreted to ensure consistent component specifications, as well as making sure that the assembly and test processes are understood. At this stage, structured dialogue between the two companies is vital to help the EMS company absorb the commonly found ‘unwritten’ details. These may include any aspects of the design more sensitive to variations, fine-tuning of process settings, or common failure modes seen during testing.
3 – Oversee the first build
Taking time to ensure the EMS provider understands as much as possible about your product range will contribute to a controlled handover achieving high initial yield and good product quality. A good EMS provider will work with you to complete the first build using what should be a robust New Product Introduction (NPI) process. When visiting potential assembly partners you should focus your attention in this area and look for suppliers that have standardised sign-off procedures in place to make sure all information necessary to build a given product is shared and understood, and fully up to date. Once the first build has been completed, a detailed review is then recommended so that any design, build or test issues can be identified and solved. As best practice, the EMS provider you move forward with should ideally collate all of their findings within a full NPI report which is made available to you immediately after the first build.
4 – Steady state
In the early stages, our recommendation with any outsourcing project, regardless of size, is always to reach a ‘steady state’ i.e. the same build quality and delivery performance you have been achieving in the past. Of course, you have probably outsourced to improve things, but introducing too many changes in the first few months can be a recipe for disaster. So, resist the temptation to demand an immediate cost saving or a 50 per cent jump in delivery performance from day one. Improvements will come, but they need to be controlled and if the EMS provider is expected to change too many things from the outset you may find you end up in a far worse position than you were originally.
Once a ‘steady state’ has been achieved, the focus for both companies can then move onto continuous improvement. Examples include identifying alternative components, where appropriate, to improve price or availability. This is an area where the EMS partner should be able to contribute high levels of expertise in disciplines such as component engineering and purchasing. The value here lies not only in lower component prices, but also in reducing exposure to lead-time fluctuations and anticipating supply difficulties such as obsolescence announcements.
There may also be opportunities to improve production efficiency by making small changes to the PCB layout for example or to the production process itself. Such Design for Manufacturer (DfM) opportunities should be highlighted to you, ideally during the NPI process, so they can be implemented in time for future batches.
5 – Two way communication
Going forward, both parties must exchange information regularly. It is equally vital for the EMS company to keep you informed of the production status, just as they need to receive timely marketing and sales forecasts from you for optimal management of the material pipeline and assembly capacity. At its most effective, this dialogue allows your assembly partner to avoid overstock situations by promptly communicating downturns in requirements; in effect ‘replacing’ inventory with information. EMS providers that run agile EDI based purchasing systems with their suppliers are able to respond quickly to market intelligence received by you to push and pull the material supply chain as your customers’ requirements continue to change.
So there it is in a nutshell, the 5 basic elements you and your EMS provider need to get right in order to guarantee outsourcing success. With all of these procedures and communication channels operating properly, your chosen EMS partner should be perfectly suited to deliver improvements to production and delivery of your product.
Image by Danny Chapman
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