The information below is to highlight points of internal OEM discussion when considering EMS partners. Our aim with this outline is to provide some general guidance and topics for electronics OEM equipment firms (brand owners) to consider on your journey formulating extended contract electronics manufacturing supply chains. See also: OEM management of EMS RFQs
1. OEM’s come in different sizes and shapes (life cycle and type of company)
- Small to large companies
- Startups – mature companies
- Hardware vs software driven companies
- High gross margin versus low gross margin companies
2. What is your companies culture as it relates to outsourcing?
In your search results, you will be able to further target provider options by choosing End Markets, then selecting Go.
3. What is the driver of your selection decision?
- BoD-driven
- NPI-driven vs expanding current product line
- Cost driven (see also: EMS global pricing vs should cost drivers)
- Second sourcing-driven
- Replacement of current source driven
- To go off shore-driven
- Driven as a result of an acquisition/divesture
4. What is your product portfolio?
- Low-high tech
- Low-high complexity
- Low-high cost
- Low-high volume
5. Geographies
- What are your geographic end markets (location)?
- Where are your offices/key teams/program management located?
- Does your NPI need to be done close to your development teams or can it be done at the main factory site?
6. What are your current landed cost (base line)?
In your search results you can further target other Industries and/or Services plus, you can add more geographies to your search.
7. Whom are your stakeholders for the sourcing decision?
SEE ALSO
Effective RFQ for EMS manufacturing programs
Differences between OEM, CM, CEM, ECM, EMS, ODM, JDM, design houses
8. What are the strength and weakness of your own team/company as it relates to the products/services you are outsourcing?
9. What is the financial reality of your company?
- Cash
- Growth/mature
- OpEx/CapEx
10. What are the key objectives/metrics you want to satisfy?
- Gross margin/landed cost
- Inventory levels/turns
- Lead-time to you customers
- Freight cost optimization
- other
11. Are there any tax benefits or constraints when selecting certain EMS geographic locations?
In your search results, you can add more Industry End Markets, more Services plus, you can add more Geographies.
12. What are your company core values and to what extend are those important while selecting a partner?
SEE ALSO
RFQ checklist for EMS manufacturing programs
OEM NPI checklist for EMS manufacturing
13. RFQ process
Identify potential EMS providers
i. Based on the above consideration you are able to eliminate the wrong ones
Invite the right EMS providers
i. IF your company EMS understanding is new: Not too few and not too many, approx. 10 to 15 in the first round.
ii.IF your company EMS understanding is mature: 4 to 7 bidders and ensure there is an outlier.
Take 2 to 3 EMS providers into final round discussions
i. Have EMS quote your entire business and ensure your team does their due diligence
ii. Negotiate the contract, master agreement, SOW before you award the business (EMS often cite thin margin defense)
iii.Be connected at different levels during the negotiations. Do not have the highest level do the negotiations, (let that person be tie breaker with their counter part)
14. Awarding the business
a. Weighted factor score on specific quantitative and qualitative RFQ criteria either based on the feedback received or findings (disclosure vs discovery) of the RFQ team.
b. Often not considered as being sensitive. To what extent does the EMS partner cover weaknesses in your own organization and to what extent would the EMS partner be willing to work with you on elements where you are not ready for outsourcing (test equipment, test scripts, repair, fulfillment, trade compliance…)
c. Select EMS provider based on the overall company and the factory/team whom is going to run your business
d. Ensure there is upfront clarity of the transition team at the EMS partner.
e. Check references (high level references..more about the core values validation than about capabilities)
f. Agree on implementation project plan/time line and resource commitment before award.
g. Ensure that all stakeholders are consulted for final decision.
h. If public company (OEM/EMS), either or both, and decision has material impact, ensure that communication is done in a controlled manner.
When awarding the business, communicate the decision and rational to all stakeholders. Ensure everyone is enrolled in the decision. Update budgets accordingly and manage the expectations. Then celebrate with your RFQ team!
Make more informed decisions and save time and money.
We understand electronics OEM decision makers are not interested spending scarce capital on in-house manufacturing capabilities. Depending on your company or division P&L, your cost of goods sold are critical in making or breaking the quarter. Your ability to move your product to your customers in your marketplace with the right quality at the right price is a cornerstone to your company survival. Our online workshops with private labs come with our EMS manufacturing program cost modeler and save OEM companies between 5% and 15% of your annual contract manufacturing program spend.
Venture Outsource has developed a proprietary, 20-point framework for identifying and comparing EMS provider actual capabilities – specifically for your program and business requirements. This service guides you to invite only the right EMS providers for first-round discussions (while eliminating poor EMS providers from consideration) so your final-round EMS discussions are with a select number of ranked candidates, with a clear outlier. Your company saves time and money, and you can make more informed decisions when awarding the business.
Learn more about our research and consulting projects here or request more info here.
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“Was able to very quickly find details on the important elements of setting up EMS and ODM partnerships, talked with an advisor for personalized info on quality providers matching our requirements while getting up to speed quickly about the industry and connect with key staff from like-minded companies and potential partners. Great resource.”
— Jeff Treuhaft, Sr. Vice President, Fusion-IO
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