While the concept of digital twin or, lights out manufacturing, holds promise in theory, key challenges in digital twin factory manufacturing is the inherent variability in manufacturing costs between different factories.
The notion of digital twin factories involves creating virtual replicas of physical manufacturing facilities, enabling real-time monitoring, simulation, and optimization of production processes.
Manufacturing product cost is subject to fluctuations based on various factors, including market demand, input prices, and economic conditions and, no two factories are equal distance to suppliers, nor do such digital twins use the exact, same suppliers, workforce, equipment tolerances…
Managing your electronics bill-of-materials (BoM) becomes more challenging for equipment firms with multiple contract electronics services providers. Quickly, things can get more expensive. Adding risk can add considerable cost.
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10 Higher costs when managing multiple EMS manufacturers
Building costing modelers for contract manufacturing negotiations
Below, we identify the top 10 supply chain risks managing multiple contract electronics manufacturing partners
- Increased risk of a suppliers failing to meet demand or experiencing disruptions – can cause delays or disruptions in the supply chain.
- Sourcing from multiple contract electronics services suppliers in different regions increases your risk of disruptions caused by political instability or natural disasters.
- Managing multiple suppliers requires more coordination of transportation from multiple locations – which can increase your risk of delays.
- Quality: Different EMS manufacturers may interpret your program specs, testing protocols, or quality standards differently, resulting in batch-to-batch variability, higher defect rates, and increased costs for incoming inspections or rework.
- Sourcing from multiple suppliers increases chances of longer lead times due to taking longer to coordinate delivery from multiple supplier factories.
- Risk of inventory holding costs also increase. When sourcing finished goods inventory (FGI) from multiple EMS manufacturing locations makes things more complex and can lead to higher inventory holding costs. EMS factory warehousing is a profit center.
- Administrative overhead burden and risk also increases when managing multiple suppliers plus, contracts can be more time-consuming and may result in increased administrative burden.
- Sourcing from multiple supplier geographies requires more compliance attention with additional customs and import/export regulations.
- Risk of increased intellectual property infringement can also surface when managing multiple suppliers. Many in industry feel this risk is more tied to working with electronics design manufacturers (ODM) but Venture Outsource feels every supplier should be managed against intellectual property infringement, knowing it can be difficult to ensure that all suppliers are compliant with IP laws and regulations.
- Risk of diluted negotiation leverage and pricing inconsistencies. Splitting volume across multiple EMS providers reduces order size per partner, weakening bargaining power for cost reductions, lead times, or favorable terms, and creating opportunities for price discrepancies or opportunistic behavior by individual suppliers.
