Outsourcing your manufacturing? Don't overlook outbound logistics

When it comes to outsourcing their manufacturing operation, most original equipment manufacturers (OEMs) primarily focus on the assembly processes.

During their evaluation, they will thoroughly investigate how well equipped their potential electronics manufacturing services (EMS) provider is to manufacture their product to the highest quality - and to the end customers' expectations.

Also in the spotlight will be the quality of the EMS company’s sourcing and supply chain capabilities, together with the strength of their key supplier relationships. In addition, their equipment, processes and quality procedures all need to be fully investigated.  

By contrast, the shipping part of the equation will often be lower down the list of priorities. After all, the selected EMS partner just needs to be capable of getting finished products from A to B, right? But outbound logistics could play a far more integral role in the success of an outsourcing venture. This blog pot should help to illustrate this and hopefully explain how this last piece of the outsourcing jigsaw can have a major impact.

Starting at the end

Shipping brings everything else together. This is because your EMS supplier can only ship products direct to your customers on time and in full if they’ve carried out all the preceding manufacturing steps correctly - i.e. buying the right components at the right time; assembling and testing the products. Equally, it doesn’t matter how well these preceding processes have been carried out if products arrive late, damaged or in the wrong configuration.

The final phases of an "end-to-end" outsourced manufacturing service that we have combined under the term outbound logistics can cover a variety of processes. These can include final configuration and test, as well as the physical tasks of packaging and shipping products.

Therefore, we would argue that shipping is actually the process that underpins everything else. So if you’re an OEM in the process of choosing an EMS provider, or reassessing your current partnership, it is well worth moving shipping towards the top of your list of capabilities required.

If we look at a typical manufacturing value chain to deliver a product to market, it would be as follows:

  1. Design it
  2. Buy it
  3. Build it
  4. Test it
  5. Ship it
  6. Sell it

Outsourcing allows OEMs to focus on the design and sales/marketing at stages one and six, while their EMS provider takes care of all the interim stages. However, many OEMs only want to outsource the assembly elements at stages three and four, with others choosing to allow their EMS partner to take care of the supply chain management and, therefore, outsourcing two, three and four. In other words, they want to undertake the shipment of the final products to their end customers themselves.

But why do you really want to see and touch your manufactured products before they are sent to your customers? For most products, it won’t actually make a difference to your customers whether they receive their goods from you or directly from your EMS supplier – provided that they arrive on time, in full and in excellent condition. And if there is an installation process, the engineers can arrive on site knowing that the equipment has arrived and already configured to their requirements.  

The benefits of an end-to-end solution

Therefore, when looking for an EMS partner, it is important to ascertain if your potential partners can offer an end-to-end outsourcing solution - all the way from buying products to delivering fully configured, highly tested products directly to the end customers. This option clearly requires a large degree of trust – a leap of faith, even – but the benefits it can deliver are significant and can have a positive impact right across your business.

OEMs who outsource part of an assembly, like the PCB or a set of cables, but then carry out the final product assembly, customisation, test, packaging and shipping themselves are only benefiting from some of the savings and efficiencies that outsourcing delivers. They retain the space, inventory, capital equipment, people and other overheads that they could relinquish if they were to incorporate this last piece of the outsourcing jigsaw.

If you're not yet ready to hand over all responsibility on this front, you could take it in stages. For instance, in addition to the core manufacturing processes, you might ask your EMS provider to create the packaging for your products, and deal with repair and rework services, but you still send the products out to your customers. Once you've assured yourself that they can carry out these functions seamlessly, you can grant them more responsibility. 

Choosing the right EMS partner is dependent on a number of criteria. However, if a supplier shows a strong performance when it comes to outbound logistics, it follows that they must be highly capable throughout the rest of the manufacturing process. Even if you ultimately decide to ship your products yourself, outbound logistics is a key factor to take into account when selecting an EMS provider. 

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Written by John Mayes

John is a business consultant with an extensive career spanning over 30 years. During this time Chris has set up, led, and acquired highly successful component distribution and EMS companies including Paragon Electronics and JJS Manufacturing.