If your contract electronics manufacturing services (EMS) partner claims they have access to best pricing, and they purchase components in bulk to drive lower component costs for you — ask them to show you. Chances are, the contract manufacturer will show you a dashboard of material ‘Buy v Build’ signals tied to your work orders for your program on the production floor and generated from an insufficient third-party materials demand SaaS vendor.
But don’t get distracted.
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Some contract electronics providers use in-house built, or SaaS vendor platforms, to analyze demand patterns and production capacities and then try to determine optimal purchase order management, inventory levels and buffer requirements.
But this does not provide insight for materials cost of good sold (MCOGs) at the line item level.
Other providers might use machine learning algorithms to analyze demand patterns or predictive analytics, or statistical forecasting models, but this also does little contributing to optimizing your program MCOGs and drive total landed cost targets for your programs.
Remain focused on the electronics provider claim of ‘lowest components pricing’ for your bill-of-materials (BOM), and ask them to expand and visualize their materials procurement and management expertise, in the following manner, below.
Here’s what you do.
First, tell the provider they can obfuscate any data for privacy, and ask them to show you a map of a series of bulk materials purchased (with obfuscated part numbers).
Components parts will be assigned to obfuscated customers, and should be broken-down by obfuscated programs within an obfuscated customer’s family of products. This will be the way you will know how well your EMS manufacturers has visibility into your program.
Whether you are on a call or in the room with the contract manufacturer when you ask them for this information, be mindful to listen for the pin to drop.
Chances are high the EMS provider will be unable to accurately track components and materials purchased in volume quantity and assigned, at the line-item level, tied to a specific board placement with direct and attributable costs. The EMS provider will also be unable to validate how and why their line-item level pricing is best.
Learn more about better materials management and contract manufacturing program pricing using Venture Outsource cost modelers.
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