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How to select an EMS provider - Part 1
Financial
strength
By Ron Keith
The first time I outsourced production was 1991 and the EMS (electronics manufacturing
services) world was very different than what we see today. The
vast majority of what was referred to as contract electronics
manufacturing (CEM) outsourcing was capacity driven overflow
printed circuit board assembly (PCBA), mostly done on a consignment
basis, and often without any test being performed by the outsourcing
contractor. The giants of the industry were based in San Jose
and Huntsville and the ‘offshore' of the era was typically a
low tech facility in some Mexican border town.
Fast forward fifteen plus years and the EMS world, and in fact, the world of
high tech manufacturing, is a different place - virtually unrecognizable
as an evolutionary product of the business models of yesteryear.
All but extinct now are the vertically integrated manufacturing
behemoths, producing their own wares in a vast global network
of captive facilities from Tijuana to Tianjin. Today, electronics
manufacturing is a core competence for a rare few, save for the
plethora of companies where electronics manufacturing itself
is the product they peddle.
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How
to select an EMS provider - Part 2
Price
and supply chain management
By Ron Keith
Part 1 of How to select an EMS Provider discussed the importance of evaluating
the financial strength of an electronics contract manufacturer,
or EMS provider. Once a potential supplier has been qualified
from a financial standpoint, the process of evaluating capabilities
and fit can begin in earnest. The first step is for the OEM to
evaluate the competitive factors in their product market and
prioritize the issues of price; delivery, schedule flexibility,
quality, reliability, intellectual property (IP) protection and
other issues so as to understand the relative importance of each
factor in the selection process.
The peril of a great price
Many OEMs have a difficult time prioritizing the competitive
factors in their given product markets and thus attempt to
weight everything equally - save for price which is almost
always given the greatest weight regardless of the actual importance
of price in the end product market.
Price is believed to be the ultimate quantifiable variable and
one that can seemingly be compared most easily on an ‘apples-to-apples'
basis. But every EMS provider is different, with different operating
procedures; systems, policies, talent, locations and experiences
and, therefore, it can be very difficult to compare electronics
contract manufacturing companies on anything other than an apples-to-oranges
basis.
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How
to select an EMS provider - Part 3
Quality management systems
By Ron Keith
Part 2 of How to select an EMS provider discusses the deceptive nature of unit
price and a few suggestions for evaluating the EMS provider's
Supply Chain Management. In this installment we examine the issue
of quality and options around the breadth of services versus
service specialization.
Quality you see vs. quality you don't
There's an old adage in the product business that goes something
like this, "I
don't know what quality is - but I know it when I see it!" This may be true for the burled walnut veneer on your new European luxury sedan's
dash board, but quality is difficult to see in most of today's
electronics products. So how do you evaluate an EMS provider
for product quality and where do you look for evidence of this
quality?
Product quality is simply the confluence of design quality and
manufacturing process quality - with the latter of the two being
our focus. Process quality in its simplest form is the elimination
of variability in all aspects of the process. Reducing variability
requires systems and a culture of quality improvement.
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How
to select an EMS provider - Part 4
The
outsourcing relationship
By Ron Keith
Part 3 of Selecting
an EMS Provider discussed the issue of quality in selecting an electronics
manufacturing services (EMS) provider and we touched on a
few issues around the breadth of services versus service
specialization. In this final installment of this series,
we discuss one of the more important aspects associated with
selecting an EMS provider -- the outsourcing relationship.
Outsourcing relationships
Today's manufacturing and design outsourcing strategies are a
far cry from the tactical, capacity-based outsourcing of decades
past. The typical EMS engagement today involves outsourcing
huge portions of the OEM's operations and virtually all aspects
of manufacturing and supply chain management, thus the EMS
supplier is responsible for a large portion of the OEM's revenue
stream.
Most EMS relationships span multiple OEM product lines and encompass
a wide range of critical processes - often varying from design
industrialization all the way through to order fulfillment and
after market service. The criticality of this relationship, and
the depth; breath, and complexity of the interactions between
OEMs and their EMS providers, makes for a relationship somewhat
unique from other supply chain relations.
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How US fiscal, monetary policy impacts sourcing decisions.
By:
Ron Keith
In 2005 Pulitzer Prize winning journalist and fellow closet economist Thomas
Friedman boldly proclaimed "The World is Flat." His treatise on globalization for the common man became an instant bestseller
and brought the realities of globalization home to the first
generation of world citizens living the new paradigm of truly
global economics.
In this new global world of compressed topography, the interconnectedness
of all things economic is dramatically enhanced.
As manufacturing, business process outsourcing (BPO), software
development and numerous other industries flock to offshore locations
with specific advantages in factor input costs, some of the underlying
issues impacting these costs are changing in real-time, and could
ultimately shift the input factor fundamentals in an entirely
new direction.
Being a closet economist, I have come to appreciate the generally
self-correcting nature of virtually all aspects of macro economics
operating in free and unfettered markets over long periods of
time. But, as a supply chain and manufacturing professional,
I operate within a different set of micro economic constraints
in a system where the self-correcting nature of things is best
explained by "The
Population Ecology of Organizations" (Hannah & Freeman 1977), whereby certain companies get de-selected from the population
based on their inability to compete.
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The
Brighter Side Of Green
By:
Michael E. Marks
Readers of this column will know that I focus on free trade, global supply chains
and creative destruction as all being great for America and for
the world. But of course I realize that each of these things
creates both winners and losers. Even if net jobs are created,
or overall standards of living are raised, there are still jobs
lost and people displaced.
So I decided to research what is happening from a job perspective,
in the "green
industries." And lo and behold, I found a topic that is nearly universally positive. I am
not addressing here the potential disaster developing from the
growth of corn ethanol, but rather the effects on the economy
and the job market from the greater green industry, including
biofuels, solar and wind technologies, and derivative products
like the Tesla Motors electric car.
To view the full article on Forbes.Com click here
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Be
Careful What You Wish For
By:
Michael E. Marks
I have noted in this column on several occasions my support for free trade and
the positive effects of global supply chains. Implicit in these
discussions is that the fear of outsourcing to low-cost, offshore
production sites, including China, is overblown. The value creation
from these same activities is rarely discussed.
Now, with turmoil in global financial markets and a fear of inflation
rearing its ugly head, it is useful to have a look at the impact
of lower manufacturing costs on the U.S. economy and inflation
rate.
By now, everyone knows about "The
China Price." In fact, that was the title of a 2004 cover story in one business magazine.
At the time, the writer outlined the massive exodus of manufacturing
to China taking place in the early part of this decade, resulting
in 30% to 50% price declines of a wide variety of products. The
article chronicled the closings of U.S. factories in wide ranging
industries such as steel, consumer electronics, kitchenware and
others, as the owners found that they couldn't compete with "'The China Price,' the three scariest words in U.S. industry."
To
view the full article on Forbes.Com click here
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