Tools for EMS manufacturing quote pricing analysis - Optimize total landed cost savings for your contract electronics outsourcing programs

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Tools for EMS manufacturing quote pricing analysis - Optimize total landed cost savings for your contract electronics outsourcing programs

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EMS Industry terms and definitions

By VentureOutsource.com Staff

SEE ALSO
OEM vs. ODM vs. CM vs. CEM vs. ECM vs. EMS

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Approved vendor list (AVL): listing of all approved sources, in addition to product part descriptions and part numbers.

Bill of materials (BOM): a comprehensive listing of all components and sub-assemblies that go into a specific product, showing the quantity of each required to assemble the item or finished product.

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Box-build: sometimes, also called systems integration, assembly work other than printed circuit board (PCB) production. The electromechanical assembly process involving enclosure fabrication, installation of sub-assemblies and components, and installation and routing of cabling or wire harnesses.

Cash conversion cycle: days of inventory plus days sales outstanding minus days of payables.

Clean room: a facility in which environmental elements such as heat, humidity, microbial growth, and user cleanliness are controlled. Used for assembly/packaging of sensitive components or products.

Contract manufacturer (CM): an organization that engages in sourcing, product assembly, order fulfillment, product distribution, and aftermarket services. A contract manufacturer usually works on behalf of an OEM. However, some OEMs can also function as contract manufacturers.

Contract electronics manufacturer (CEM): an organization that engages in electronics product design and assembly, engineering services, order fulfillment, product distribution, and aftermarket services. A contract electronics manufacturer can also be called an electronics contract manufacturer (ECM), and usually works on behalf of an OEM. However, some OEMs can also function as ECM, CEM. See also, electronics manufacturing services (EMS).

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Core competencies: activities or practices, such as product development, determined by a company as critical to its long-term success and growth. Core competencies are typically based on skill or knowledge sets rather than products or functions. They provide return on investment and act as a barrier for other companies trying to enter a particular market. Many manufacturers choose to focus on core competencies and outsource production, or activity-based, tasks. Many OEMs decide to keep their high-level engineering and design work as internal competencies, particularly as these might apply to new products and highly complex products.

Corrective action request (CAR): an action item that surfaces whereby the requesting party (either the OEM or contract manufacturer) asks the party responsible to conduct a root cause analysis and help bring the issue to resolution.

Days of inventory: the amount of inventory (two period average) divided by cost of goods sold (COGS) divided by the number of days. Inventory days metric measures the number of days of inventory a company has on hand given current production levels.

Days of payable: a company’s payables (two period average) divided by its cost of goods sold (COGS) plus its sales, general and administrative costs divided by number of days.

Days sales outstanding: a company’s receivables (two period average) divided by revenues divided by number of days.

Design for manufacturing (DFM): a process integrating manufacturing and optimization principles into the earliest stages when designing and developing a product to be manufactured.

Design for test (DFT): a process that is typically combined with DFM that optimizes product designs for testing in a production environment.

Electronics manufacturing services (EMS): an industry based on providing contract design, manufacturing and product support services on behalf of OEMs. Traditional services include PCB assembly and box-build and testing. Today, EMS providers are continuing to absorb more and more of the supply chain and they are providing numerous services such as supply chain management, global distribution, logistics, customer support and warranty repair. However, in most cases, all intellectual property (IP) belongs to the OEM. EMS providers are also referred to as electronics contract manufacturers (ECM), contract electronics manufacturers (CEM).

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Engineering change order (ECO): an alteration made to an AVL or BOM, such as the replacement of one component by a substitute component. Any changes should be prepared, approved and incorporated promptly and correctly to minimize problems. Changes often vary in complexity and urgency, but can have a ripple effect. Any ECO should be documented on a blank form or template that contains key information such as a description of change; a reason for the change, the type of change and, the implementation date.

First-pass yield (FPY): typically in percentage, the amount of product tested that passed inspection on the first attempt.

FSC CODES (Federal Supply Class) system consists of 78 groups, which are subdivided into 645 Federal Supply Class classes. Each class covers a relatively large and mixed area of commodities. Below are some FSC codes relative to the electronics industry.
5963 – Electronic Modules
5998 – Electrical and Electronic assemblies, Boards, Cards, and associated hardware
5999 – Miscellaneous Electrical and Electronic components

High-mix, low-volume: a contract manufacturing environment where products assembled vary in application, lot size, and production processes. Contract manufacturers providing high-mix, low-volume production have the ability to change over product requirements and convert assembly lines in a matter of hours, sometimes minutes. They can easily add capacity to accommodate increased volume and rapid throughput cycles. However, high-mix, low-volume manufacturing creates numerous challenges because there are more areas to invite error. Lower volumes demand more frequent changeovers and may only last for a few shifts, or days.

SEE ALSO
CM Industry contracts and terms sheets

Intellectual property (IP): any product of the human intellect that is unique, novel and unobvious and, has some value in the marketplace. This can include ideas, inventions, business methods and manufacturing processes.

Joint design manufacturer (JDM): a company that helps design products for customers. However, distinction on who owns the intellectual property can be difficult to determine and can surface as licensing problems.

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