EMS manufacturers always try and manage the narrative. EMS suppliers will tell you how good they are and, present quote pricing in ways to make OEMs think they are willfully disclosing internal EMS cost information to you about your program, unit cost per volume …
And since OEMs focus on the pricing of EMS fees, its important to note there is no EMS provider or EMS quote software vendor today that is capable of performing the full quote process properly: best price/availability for raw materials, accurate labor estimates, EMS industry business technical savvy. Program quotes created by EMS providers and presented to OEMs are made with the best interest of EMS providers in mind — not OEM buyers of EMS services.
Every quote tool used by EMS manufacturers today generalizes, then applies random variables to cover the EMS provider’s probable losses, as a typical RFQ reply could be materials + 20% (as the laziest reply), all the way to a 20-page response with complete DFM and other well-planned details. The issue with these EMS quote responses to OEM RFPs is they are typically re-used from similar programs and the real costs do not add up when thoroughly reviewed.
And because EMS manufactures don’t really know what their true internal costs are they over-compensate. (See double- and triple-dipping below)
Our tools help OEMs know what to look for after EMS providers are finished ‘estimating’ pricing and quoting your program. You quickly can see how the EMS provider is not being transparent.
We analyzed 3,000+ EMS manufacturing sales quotes for OEM programs ranging from NPI to large-scale manufacturing and this includes highly complex systems builds across multiple factories and geographies.
In every EMS quote we’ve processed to date, the OEM paid considerably more than they should have. The OEM could have negotiated further to cut costs and, the EMS provider could still have made a profit.
SEE ALSO
OEM manufacturing cost models for EMS manufacturing programs
Best practices for EMS manufacturing RFQ quotes
The OEM buy decision based on go vs no-go analysis is flawed in most instances because of the competing nature of EMS industry and, the fact we can prove EMS provider profits are, on average, 12%+ (and considerably higher) than EMS providers claim.
EMS providers have created this artificial environment where the understanding gap between EMS cost disclosure vs OEM price discovery is a non-exact science or, fuzzy-math based. EMS manufacturers manage the RFQ phase narrative with quote processes and tools designed for their benefit. With fuzzy math as a base line in the quote you assume all the risks are baked into that as well.
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