Cost Reduction for Electrical Manufacturing Services
Source One’s Procurement and Engineering experts can help your company reduce costs, increase value, and enhance the stability of your Electrical Manufacturing Services (EMS) and PCBA spend category.
Controlling costs for complex direct materials in the Electrical Manufacturing Services Category (Printed Circuit Board Assemblies (PCBAs), Wire Harnesses, Box-Builds, and other Electromechanical Assembles) is a challenge for procurement professionals. Year over year price increases in both materials and labor, changes in designs, and quality issues all impact the budget and ultimately the cost of finished products.
Source One Can Help.
Our team of EMS strategic sourcing experts understand critical cost reduction strategies such as gathering market intelligence, consolidating spend from low level suppliers in order to leverage the full business opportunity and negotiating power of combined material costs, managing design-driven pricing with DFM and VAVE/PPV programs, optimizing the EMS supply base to match requirements, and managing quality (QA/QC) issues impacting production lead times by diversifying the supply base or initiating risk mitigation programs that include safety stock and obsolescence considerations.
Data Gathering and Compilation
- Gather PCBA specifications from engineering, ensuring bid can be performed with multiple suppliers by using platform-independent Gerber files or by transitioning from manufacturer-owned designs
- Organize design files into bid packages with other layout drawings and create BOMs for ease of pricing each component in the assembly
- Separate PCBA material costs from labor, overhead and markup or identify alternate components (design for manufacturability – DFM) to minimize manufacturing/assembly time
- Identify unique features of each circuit board such as oversize substrate, large backplane, conformal coating requirements
- Identify inspection/test requirements such as visual inspection, functional, in-circuit
- Complete non-recurring engineering (NRE) estimates of tooling, jigs, solder masks
Supplier selection, matching, and relationship building
- Identify manufacturing regions for low-mix/high volume and high-mix/low-volume considerations – Mexico, Europe, China, Taiwan, Singapore, Malaysia
- Explore near-shoring and off-shoring partner selection and relationship building
- Develop strategic partnerships with Contract Manufacturers (CMs) for PCBAs and box-builds or finished assembly construction
RFP Process and Negotiations
- Determine supplier service offering, quality management programs, capacity and capability limitations
- Submit Request for Quote (RFQ) to gather pricing/savings tiers and optimal order/build/release schedules that match component tier pricing and efficient production lot sizes
- Gather recommendations and pricing for lower cost or more readily-available components (especially for obsolescence program parts)
- Request estimated NRE costs for new fixturing/tooling that minimizes manufacturing cycle times and weigh costs against tooling transfer costs, if applicable
- Utilize pre-production bids to determine best price breaks based on minimal volume commitments
- Understand risk mitigation strategies through stocking programs for long lead parts generating emergency stock or safety stock
- Assess the supplier’s own supply chain and ability to leverage existing client relationships/volumes with manufacturers to provide best in class component pricing
- Conduct open PO negotiations and establish good faith agreements, committed and informal non-committed blanket PO and forecast management
- Evaluate final mix of component supplier and subcontractor selection, domestic and offshore manufacturing, sheet metal fabricators, and machine shops
- Complete facility and supplier audit
- Develop Master Services Agreement (MSA) to optimize raw material and finished goods volume commitments
- Establish a transition plan and manage to a fixed timeframe in order to minimize costs associated with NREs and inventory buy-outs
- Track pricing and quality during new supplier phase-in period to make sure the full savings opportunity is attained
- Implement inventory management – VMI, Kanban-JIT, consigned inventory, projecting and coordinate inventory level changes and release quantities
- Stand up QA/QC and inspection process
Take the first step in enhancing your EMS and PCBA category performance and achieving sustainable cost savings. Contact Source One’s electrical manufacturing service category experts today.
Spend Management Services
Direct Expenditures Category Expertise
- Form EMS and PCBA bid packages in a supplier-independent and easy-to-understand format.
- Gather both assembly and BOM-based material pricing along with possible alternates in order to evaluate the material cost, labor, overhead, and markup pricing matrix.
- Build relationships with EMS and PCBA suppliers instead of conducting pricing exercises to drive successful negotiations and lead sustainable year over year price reductions.
Source One’s direct material strategic sourcing experts gather not only price points for the completed assembly, but also the labor, individual component pricing, and alternate component pricing which can be used to match manufacturing region, core capabilities, and evaluate possible savings opportunities to drive DFM (design for manufacturability) and purchase price variance (PPV) analysis and value analysis/value engineering (VA/VE) programs.