“How can we make cost modeling decisions and budget forecasts for our programs based on lowest costs for components and materials on our BOM?”
This question usually comes from purchasing and commodity managers. Material costs can make up sixty to eighty percent, and more, of total electronics equipment product costs.
Part of the answer to the question above is a distribution issue. How does anyone know if they are getting the best price?
Having some familiarity with the market plus, knowing how distributors and semiconductor and connector vendors set components pricing can help. But pricing is more often than not based on perceived (vs actual) availability.
Otherwise, you spend hours or days shopping it, which is what buyers in most OEM equipment manufacturers do when sourcing for electronics supply chains. You’re also more apt to generalize.
Plus, if you don’t get a minimum order quantity (MOQ) and, if you don’t have a costed BOM based on volume, its very likely you’re getting a bad deal. And if there are no commits on the buy, then you also know you’re getting the worst, best deal.
Add to this, CMs and electronics manufacturing services (EMS) providers will have lots of side deals they leverage with their supplier and distributor relationships.
In your search results, you can add more Geographies, add more Services plus Industries to customize your search.
OEM buyers with no leverage or without deep contract electronics experience are left relying on asking components distributors for feedback – resulting in OEM buyers seeing a common price amongst those components.
Meanwhile, OEM professionals attending Venture Outsource online costing modeler workshops and accompanying online labs are armed with our effective modelers and educated with detailed, collaborative training – specific to your programs – how to avoid generalizing and wasting valuable time.
It comes down to having the right tools and negotiating tactics.
SEE ALSO
How to know if your supplier components price is ‘best price’
Comparing manufacturing costing modeler types
In your confidential, online lab (scheduled after the workshop) we process two of your outsourcing programs through your modeler, in detail, for you. We show you where and how to use our costing modelers to your benefit.
All large companies have massive, shared nested workbooks, especially in finance, project office spaces, anything around accounting. Microsoft SharePoint attempted to dissolve this but has been unable because of the comfort nested workbooks provide.
BOM cost reduction solutions with defensible leverage
Users of our costing modelers can think of our modelers as software. And, while our modelers can be automated and integrated with SAP, Oracle, QAD… the fact that our modelers are workbooks and not actual software means there are more pros than cons, such as, software requires more coordinating with various other departments; more defined vendor assessment processes and routines, per-seat licensing, security clearances… to name a few.
Typically, electronics OEM manufacturers using our costing modelers mandate all of their buyers participate in their company’s private lab.
*To optimize cost modeler training in your private lab, we base data input numbers substantiated for your program, and encourage you to invite your full team to attend, where we discuss challenges and solutions together – specific to your outsourcing programs – and focused on the problems and conveying a lot of information to your team. The antithesis of this would be giving out a report to you after the workshop, and then you read it at your leisure… The latter is not as effective as going through training and finding solutions, together.
Buyers are later tasked to use their modeler to assess every outsourcing program currently on the books. Modeler output is then used as defensible leverage to prepare for program reviews with your CMs and EMS providers – for supplier contract negotiations (and re-negotiating agreements) to optimize total landed product costs and reduce annual contract manufacturing spend.
Unique costing modelers with unique benefits
Venture Outsource has participated in analysis of 5,000+ different electronics outsourcing programs and contract electronics provider-prepared pricing quotes. We know the business and finance nuances of contract electronics industry and many of the different business models, intimately.
Today, the vast majority of outsourcing electronics program cost modelers deployed are built (by design) to intentionally obfuscate true contract manufacturer and supplier internal costs. Engineered by third-party SaaS vendors or CMs and distributors, these modelers are created to serve suppliers – so suppliers can keep the obfuscation game going because few suppliers fully understand their internal costs so they play it safe, by padding margins.
When choosing a manufacturing costing modeler, it’s important to note that the cheapest option may not always be the best. It’s important to consider the experience, qualifications and reputation of the costing modeler before making a decision. Our costing modelers are designed, exclusively, with the best interest of buyers of contract electronics services in mind.
In fact, in nearly every OEM client RFQ engagement project we conduct where the buyer already signed the contract supplier’s service level agreement, the OEM client ended up paying considerably more for total landed program costs than they should have.
Our data-driven, standalone cost modelers simulate your contract electronics manufacturer’s business and can accurately compute all costs surrounding the design costs and manufacturing of your outsourcing programs, including level of expertise and experience required, the scope of your project, and the location of the service provider, and much more. From nanotechnology and ASICs programs to printed circuit board assembly (PCB) manufacturing for simple to massively complex, full-build systems and equipment, and large-scale extremely sophisticated electronics programs, our costing modelers are so good, users of our modelers save, on average, minimum of 5%, to as much as 15%, and more, on annual contract manufacturing spend – all in a workbook on your desktop, notebook or tablet.
Clients using our costing models are taught how and when to recognize certain supplier operating inputs and when constants should be modified for negotiating supplier pricing and program volume variations and supplier quarterly business review discussions, as well as tracking supplier performance to cost targets – closing the gap between supplier management tools and supplier performance.
Paid attendees completing our workshop and private lab are armed with a personalized certificate of completion, and know more about their contract manufacturers’ actual cost of doing businesses than the majority of top executives at CMs they are working with, or considering.
ROI for your workshop is captured with your first contract manufacturing program run through our modeler, which is yours to keep and use for all your current programs, and future programs.
Learn more about Venture Outsource contract electronics costing modelers.
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