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How to Align With The Right EMS Provider

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How to choose a Electronic Manufacturing Services supplier and the items to consider during your due diligence process.

How to choose a Electronic Manufacturing Services supplier and the items to consider during your due diligence process.

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  • 1. How to Align With
    The Right EMS Provider
  • 2. 10/18/2011
    2
    What Will Be Addressed Today
    • NOTE:Electronics Manufacturing Services (EMS) is the new name for the Contract Manufacturing (CM) Industry
    • 3. Current EMS market trends
    • 4. Best practices on choosing an EMS partner
    • 5. Key elements of success to achieve with an EMS supplier
    • 6. Pro’s and Con’s of EMS outsourcing
    • 7. Brief (your company)overview
  • 10/18/2011
    3
    Current EMS
    Market Trends
  • 8. 10/18/2011
    4
    Primary EMS Industry Solutions
    • Printed Circuit Board Assembly (PCBA)
    • 9. PCB assembly refers to the attachment of various electronic components onto a bare printed circuit board, plus any test activities performed at this level of assembly
    • 10. PCBA Value
    • 11. The value (cost of goods sold, or COGS) of all material, labor, and overhead associated with an assembled printed circuit board
    • 12. Box (or System) Assembly
    • 13. Box assembly refers to the assembly of one or more printed circuit boards, plus other items such as cable harnesses and enclosures, into a final product (or a largely self-contained electronics assembly that will be embedded into a larger piece of equipment). This also includes any test activities performed at this level
    • 14. Box Assembly Value
    • 15. The value (COGS) of all material, labor, and overhead of the box assembly, not including the value of the assembled PCBs within the box assembly.
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition
    © 2007 Electronic Trend Publications, Inc.
  • 16. 10/18/2011
    5
    EMS Market Growth Overview
    Revenue ($M)
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.
  • 17. 10/18/2011
    6
    EMS Worldwide Market by Region
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.
  • 18. 10/18/2011
    7
    EMS Worldwide Market Industry Segment
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.
  • 19. 10/18/2011
    8
    EMS Worldwide Market Industry Cont…
    PCBA vs. Box/System Assembly Growth
    CAGR = 6.5%
    CAGR = 7.2%
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.
  • 20. 10/18/2011
    9
    EMS Worldwide Market Industry Cont…
    Total Assembly Value ($) Growth Overview
    Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.
  • 21. 10/18/2011
    10
    EMS Industry Summary
    • All Industry Segments Are Profitable & Growing – Tier 1-3
    • 22. EMS suppliers need to be profitable to avoid strategic financial risks
    • 23. All Industry Segments Are Identifying Focus / Niche Strengths
    • 24. (Your Company)focus is on products with a “man-to-machine” interface
    • 25. Mergers & Acquisitions Remain a Primary Strategy for Growth / Market Penetration
    • 26. (Your company)remains focused on growth opportunities in this area
  • 10/18/2011
    11
    Choosing An
    EMS Partner
  • 27. 10/18/2011
    12
    Choosing an EMS Partner
    • OEMs spend billions of dollars annually outsourcing electronics production. Choosing the wrong supplier can result in significant cost increases, poor product quality, and insufficient customer relationship issues.
  • 10/18/2011
    13
    Choosing the Wrong Supplier
    • Cost Overruns
    • 28. Quotation accuracy from both the OEM and the EMS provider is essential to avoid unnecessary cost – short and long-term
    • 29. Quality Problems
    • 30. Regular process reviews – i.e. audits, quarterly business reviews, and establish consistent communication channels help prevent quality problems
    • 31. Missing Production & Time-to-Market Requirements
    • 32. Ineffective material management and capacity planning, poor quality yields, insufficient administrative or engineering bandwidth, or simply a misalignment between your business model and your EMS partner can dismantle your production pipeline
  • 10/18/2011
    14
    Choosing the Right Supplier
    • Cost Goals Achieved
    • 33. Quotation accuracy from both the OEM and the EMS provider is essential to avoid unnecessary cost – short and long-term
    • 34. Quality Success
    • 35. Regular process reviews – i.e. audits, quarterly business reviews, and establish consistent communication channels help maintain solid quality results
    • 36. Meeting Production & Time-to-Market Requirements
    • 37. Effective material management and capacity planning, strong quality yields, sufficient administrative or engineering bandwidth, and a good alignment between your business model and your EMS partner can enhance your production pipeline
  • 10/18/2011
    15
    Where Do I Start?
    • Develop an outsourcing strategy then select an EMS partner that can scale with your capabilities and capacity growth
    • 38. Identify your outsourcing requirements
    • 39. Determine your cost reduction goals
    • 40. Define your time-to-market plan
    • 41. Establish your after sales support needs
    • 42. Find suppliers that match your business model – i.e. product mix
  • 10/18/2011
    16
    Product Mix Overview
    EMS Approach to Product Mix
  • 43. 10/18/2011
    17
    What Makes a Good EMS Partner?
    • Evaluate Suppliers on Three Key Process Capabilities
    • 44. Administrative Processes – what is the suppliers order processing, purchasing practices, production planning, communication process?
    • 45. Capabilities and Capacity – does the supplier meet your current and growth, quality, and technological requirements?
    • 46. Engineering Change Order (ECO) Management – can the supplier adequately accommodate your design changes and improvements and balance all the manufacturing processes to meet those needs?
    • 47. Communication, Customer Service, & On-Time Delivery– Is the supplier responsive to your everyday needs and what is their system / processes that accommodate this requirement?
  • 10/18/2011
    18
    Good EMS Partner Cont…
    Product
    Process
    Product Manufacturing
    Delivery
    • New Product Introduction (NPI) Capabilities
    • 48. Domestic and offshore capabilities
    • 49. Design, prototype, documentation, process development, ECO flexibility, and transition plan to production support
    Product
    Analysis
    Process
    Analysis
    Product
    Design
    Process
    Design
    Engineering
    Change
    Orders
    Prototype
    Build
    Prod. Line
    Build
    Production
    China
    China
    Transition
    Plan
    Prototype
    Test
    Prod. Eng.
    Test
    Production
    Capacity Test
    Delivery
    Logistics
    Investment Period
    Revenue Period
  • 50. 10/18/2011
    19
    Good EMS Partner Cont…
    • Resource Planning System
    • 51. Inventory management production scheduling functionality
    • 52. A closed-loop system that quickly identifies misalignment and initiates action to correct material and production bottlenecks upon discovery plus incorporates a communications system that notifies the OEM
    • 53. A robust process (software/people/procedures) that generates timely information for immediate action by front-line people
    • 54. A system that identifies production gaps and balances supply with demand
  • 10/18/2011
    20
    Good EMS Partner Cont…
    • Excess & Obsolete – End-of-Life Materials Process
    • 55. Inventory management that accurately tracks and maintains proper communication regarding E&O issues – this prevents substantial materials liability issues when established up front
    • 56. End-of-life / life cycle planning is critical to supporting existing production revisions while the new versions are being implemented to ensure production flow remains steady for both
    • 57. Inventory turns are the primary result of either strong or weak E&O or EOL processes for the both the EMS supplier and the OEM
  • 10/18/2011
    21
    Good EMS Partner Cont…
    • Make Your Decision on Total Cost vs. Price
    • 58. Look at total acquisition cost and not the price alone – BOM, labor, test, after sales service, etc…
    • 59. Leverage materials relationships with together with the EMS supplier to achieve the best price, however, working together to achieve this requires trust and openness – i.e. providing costed BOM’s
    • 60. End-of-life / life cycle planning for the whole product line should be considered when making this decision of who to choose as a “partner” to manage the whole supply chain, manufacturing, and logistics requirements together
    • 61. Look for a long-term partnership rather than a short-term price
    • 62. Establish a formal cost reduction program with your suppliers
  • 10/18/2011
    22
    Pro’s & Con’s For Outsourcing EMS
  • 63. 10/18/2011
    23
    Keys to Success
    With Your EMS Supplier
    • Mutually complementary cultures / personalities
    • 64. Processes in place to provide solutions
    • 65. NPI capabilities
    • 66. Domestic vs. offshore solutions
    • 67. Resource planning system / process
    • 68. Cost reduction plan
    • 69. Inventory management processes established
    • 70. Life cycle management plan
    • 71. Quarterly business review process
  • 10/18/2011
    24
    EMS
    Industry
    Background
  • 72. What is the EMS Industry?
    EMS or Electronic Manufacturing Services Today
    • Design
    • 73. Printed circuit board assembly (PCBA)
    • 74. System build / final assembly
    • 75. Fulfillment / distribution services
    • 76. After Sales Support
    Industry History / Background
    • 1950's the printed wiring board and integrated circuit were invented by Texas Instruments and refined by others
    • 77. 1961 SCI of Alabama was a "contracted manufacturer" for the NASA lunar space program to meet cost reduction initiatives and lead-times to land on the moon
    10/18/2011
    25
  • 78. 10/18/2011
    26
    EMS Industry History
    1960’s – 1980’s
    • Industry referred to as "contract manufacturing" or "CM" industry
    • 79. Primary focus on PCBA for commercial and defense OEM's
    • 80. The vast majority of OEM's did their own PCBA in-house
    • 81. Most OEM's consigned 100% of materials to CM's
    Traditional Supplier Relationships
    1990’s
    • Silicon Valley – OEM's began to focus on the core competence of R&D, sales / marketing, and service and outsourced manufacturing as a cost effective measure to ensure time to market goals
    • 82. Turnkey solutions begin – labor, materials, and test
    • 83. Outsourcing migration – OEM’s sold off PCBA, PCB fab and other non-core capabilities to CM's
    • 84. Wall Street – CM’s proved to be viable business model
    • 85. Services outsourced – Design, NPI, PCBA, test, materials, system build, end-of-life functions began to be outsourced to CM's
    • 86. End-to-End – CM's begin to provide "end-to-end" global supply chain solutions
    Strategic Relationships Emerge
  • 87. 10/18/2011
    27
    EMS Industry Background cont…
    2000 Through Today
    • Industry changed name to EMS (Electronic Manufacturing Services)
    • 88. 100% turnkey of end-to-end solutions is standard from tier-1 through tier-3
    • 89. All-in-one model is established in tier-1 through tier-3 Suppliers
    • 90. Facilities and equipment are not the main differentiator anymore
    • 91. Cost effective strong relationships are still king!
    (Your Company) Has Positioned Itself to Support
    Our Customer’s Future Strategic Needs
  • 92. 10/18/2011
    28
    Customer
    Support
    Structure
  • 93. Customer Focus Team
    10/18/2011
    29
  • 94. 10/18/2011
    30

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