-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueSolder Printing
In this issue, we turn a discerning eye to solder paste printing. As apertures shrink, and the requirement for multiple thicknesses of paste on the same board becomes more commonplace, consistently and accurately applying paste becomes ever more challenging.
A Culture of Thriving
One cannot simply command thriving; it must be nurtured, developed, and encouraged. In this issue, we explore strategies to improve your working relationship model—both internally and externally. In this culture of thriving, your business will grow in the process.
Certifications
Certifications have historically been seen as a cost of doing business, but how do we turn them into a positive ROI and a value to both customer and vendor?
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
The Hidden Costs when Outsourcing your Electronics Manufacturing
November 25, 2016 | Neil Sharp, JJS ManufacturingEstimated reading time: 3 minutes
![](https://iconnect007.com/application/files/2416/3121/8551/NeilSharp-JJS.jpg)
When you outsource your manufacturing operation to an electronics manufacturing services (EMS) provider, you expect to reap the benefits of your decision. Ultimately, you gain back more time to focus on designing, marketing and selling your products – and you also enjoy access to your partner's contacts and expertise. But, of course, you also expect the financial side of your partnership to be rosy too.
There's a lot of truth in the saying, "you get what you pay for" – so it's important not to skimp on price when selecting a partner. Equally, you need to remain competitive. So, when you're comparing quotes from EMS suppliers, how do you find the right fit for you?
In fact, the most attractive quote may not be all that it seems because there are a number of "hidden" costs that are often overlooked. So how can you make the best choice when outsourcing?
Unit Cost Versus Total Cost
When you work out the price of an outsourcing project based on the unit cost, the picture can prove particularly favorable. Unit cost is calculated by working out both variable and fixed production costs and then dividing the total by the number of units produced. This figure encompasses tangible costs such as material, labor fees and margins, making it easy for you to identify your break-even point.
However, this method does not accurately reflect the total cost of the project, which could be far higher.
According to The UK EMS Industry Report 2013 - 2018, carried out by Reed Electronics Research: "The issue of price reduction has moved to the very forefront of OEM's requirements from their EMS supplier. The total cost of a project is important and in the past there have been many instances whereby an OEM has negotiated a low unit price for a particular electronic assembly, only to see significant costs build up, and be argued over, as problems in the low cost location have developed.
"[…] Rationally, the OEM would be considering the full cost over the lifetime of the product and that would include some measure of budgeting for things that go wrong, and the amount of supervisory time that they have to allow on the project. In reality, the unit price becomes the focus because it is visible."
Giving yourself a buffer zone, so-to-speak, allows you to calculate the cost of your initiative far more accurately. And then you're not thrown when hidden costs rear their head.
Furthermore, the best EMS suppliers will be able to offer you a range of value-added services that mean you recoup costs elsewhere. For instance, they may offer advice on how to make a certain process more cost-effective; or they may offer "through-life" or "end-of-life" services, which involve them taking ownership of product repairs or refurbishments and servicing a product as it moves through its lifecycle.
Having taken all these factors into consideration, you will be able to paint a far more realistic portrait of the financial implications of your outsourcing project.
Comparing Apples with Apples
When choosing between EMS providers, it's crucial to ensure that you are comparing like with like. For example, if one supplier offers you a lower price, but only has the capacity to manufacture X amount of products, it's not realistic to compare them with a supplier who offers you a higher price but has the capacity to grow with you as and when demand increases.
Finding out further down the line that your chosen partner is not a good fit after all is a situation you really want to avoid – and one that sees additional costs accrue.
As with any business endeavor, outsourcing your electronics manufacturing to an EMS supplier means weighing up the costs involved. However, it's not simply a case of finding the partner who offers the lowest unit cost. It's essential to take into account the bigger picture; to keep an eye out for hidden costs and value-added services; and to assess each potential partner on a level playing field.
This article originally appeared on the JJS Manufacturing blog which can be found here.
Suggested Items
Electronic Components Market Update
10/04/2018 | Daniella Baldock, JJS ManufacturingUnfortunately, there is still no end in sight to the electronic component shortage, and some lead-times are being quoted with 2019 and even 2020 delivery dates! So if you are working with an EMS provider, it remains vital that you communicate and share forecast information with them. You may also want to start looking at the option of fitting, or designing in, smaller components to your PCB assemblies.
What SMT Component Shortages Mean for Design and Manufacturing Engineers
09/13/2018 | Russell Poppe, JJS ManufacturingMuch has been written about the increasing shortages of electronic components such as MLCCs, chip resistors and other semiconductor devices. And the manufacturing industry is now seeing price increases and greatly extended lead times. It seems the situation is likely to get rapidly worse rather than better. What can we do? Read on.
5 Supply Chain Questions to Ask Your Assembly Partner
08/16/2018 | Neil Sharp, JJS ManufacturingA key question for any OEM who may be considering outsourcing production is whether to maintain its existing supply chain or to hand those crucial purchasing decisions over to its assembly partner. This article highlights five questions to ask a potential assembly partner before handing over the responsibility for your supply chain management.
How Investment in Staff Well-Being Impacts Manufacturing Productivity
08/09/2018 | Sue Poole, JJS ManufacturingAs manufacturers seek to address the challenges of increasing efficiency, there's a greater emphasis on the value of high-performance working practices such as Lean manufacturing. But the emphasis on continual quality improvement processes can also have an indirect effect on employee health and well-being. Here's why manufacturers should invest in the well-being of its employees.
Overcoming Growth Challenges
07/19/2018 | Neil Sharp, JJS ManufacturingGrowth is usually seen by manufacturers as a good thing—a sign of success and a result of hard work. But if this growth isn’t planned for, or the manufacturer can’t react in time, growth can cause the same devastating results as if the business was in decline. This article looks at seven common areas that can cause manufacturers a headache when their business is growing, along with solutions to help ease the pain.