Electronics contract EMS manufacturers will price direct labor (DL) costs into quoted pricing during RFQ phases with OEM prospects and existing customers seeking EMS services.
Many electronics OEM equipment manufacturers recognize DL costs tied to MCOGs. But, what many OEMs do not often do properly is map DL costs EMS factory activities on the production floor, namely, identifying the following, to name a few:
- Activity station
- Process phase or activity
- Task, with timing (takt)
- Headcount, operators
- Optimal units per shift
- Production line (or cell) vs location variables
- Value add coefficient
The above is only a partial list, when drilling down to try and justify DL costs and managing DL assigned to OEM programs in the EMS manufacturer’s quoted pricing.
SEE ALSO
Asia labor costs and China manufacturing relocation impact considerations
Cost models for contract manufacturing supply chains
Its common for EMS suppliers to get away with excessive fees (profit) if OEMs fail to exhibit best practices during the EMS request-for-quote (RFQ) phase and subsequent negotiations of the EMS contract service agreement.
