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.
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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 typically designed and administered with best interests of the vendor/supplier in mind, not OEM customers.
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