How to Align With The Right EMS Provider

How to Align WithThe Right EMS Provider

Design & Prototype Service

Printed Circuit Boards

Electro- Mechanical Components

Electronic Manufacturing Services

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Design & Prototyping Services

Printed Circuit BoardFabrication

Electro-Mechanical Components


Fulfillment / Distribution Services

Design & NPI Services


Printed Circuit Board Fabrication


After Sales Support Services

NOTE: Electronics Manufacturing Services (EMS) is the new name for the Contract Manufacturing (CM) Industry

Current EMS market trends

Best practices on choosing an EMS partner

Key elements of success to achieve with an EMS supplier

Pro’s and Con’s of EMS outsourcing

Brief (your company) overview

What Will Be Addressed Today





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Current EMSMarket Trends





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Printed Circuit Board Assembly (PCBA) 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

PCBA Value The value (cost of goods sold, or COGS) of all material, labor, and

overhead associated with an assembled printed circuit board

Box (or System) Assembly 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

Box Assembly Value 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.

Primary EMS Industry Solutions

Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition© 2007 Electronic Trend Publications, Inc.





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After Sales Support Services 2006 2007 2008 2009 2010 2011

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Worldwide EMS Market: 2006-2011

EMS Market Growth Overview

Rev

enue

($M

)

Source: The Worldwide Electronics Manufacturing Services Market, 4th Edition © 2007 Electronic Trend Publications, Inc.





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EMS Worldwide Market by Region


23%

19%

54%

4%

2006

North America Europe Asia

Other

16%

14%

67%

3%

2011

North America Europe Asia

Other





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EMS Worldwide Market Industry Segment


2%32%

38%

12%

7%5% 2%

2%

2006

Automotive Communications Computer

Consumer Industrial Medical

Aviation Defense/Other

2%

43%

33%

9%5%

5% 1%2%

2011

Automotive Communications Computer

Consumer Industrial Medical

Aviation Defense/Other





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EMS Worldwide Market Industry Cont…


2006 2007 2008 2009 2010 2011$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

PCBA Value ($) Box Assembly Value ($)

CAGR = 7.2%

CAGR = 6.5%

PCBA vs. Box/System Assembly Growth





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EMS Worldwide Market Industry Cont…


Total Assembly Value ($) Growth Overview

2006 2007 2008 2009 2010 2011 CAGR %

Computer 304,477 329,950 362,104 359,416 386,628 421,567 6.7%

Communications 207,784 227,556 249,500 249,816 270,622 293,471 7.1%

Consumer 183,028 199,152 218,770 219,791 238,026 259,881 7.3%

Industrial 66,958 69,120 73,943 71,946 75,610 79,928 3.6%

Medical 38,887 43,519 48,535 50,125 55,038 60,783 9.3%

Automotive 68,486 77,550 83,025 86,386 91,702 99,240 7.7%

Aviation/Defense/Other

53,312 54,447 59,923 57,342 61,224 65,055 4.1%

Total 922,932 1,001,294 1,095,799 1,094,822 1,178,850 1,278,925 6.8%





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All Industry Segments Are Profitable & Growing – Tier 1-3 EMS suppliers need to be profitable to avoid strategic financial

risks

All Industry Segments Are Identifying Focus / Niche Strengths (Your Company) focus is on products with a “man-to-machine”

interface

Mergers & Acquisitions Remain a Primary Strategy for Growth / Market Penetration (Your company) remains focused on growth opportunities in

this area

EMS Industry Summary





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Choosing AnEMS Partner





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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.

Choosing an EMS Partner





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Cost Overruns

Quotation accuracy from both the OEM and the EMS provider is essential to avoid unnecessary cost – short and long-term

Quality Problems

Regular process reviews – i.e. audits, quarterly business reviews, and establish consistent communication channels help prevent quality problems

Missing Production & Time-to-Market Requirements

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

Choosing the Wrong Supplier





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Cost Goals Achieved

Quotation accuracy from both the OEM and the EMS provider is essential to avoid unnecessary cost – short and long-term

Quality Success

Regular process reviews – i.e. audits, quarterly business reviews, and establish consistent communication channels help maintain solid quality results

Meeting Production & Time-to-Market Requirements

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

Choosing the Right Supplier





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Develop an outsourcing strategy then select an EMS partner that can scale with your capabilities and capacity growth

Identify your outsourcing requirements

Determine your cost reduction goals

Define your time-to-market plan

Establish your after sales support needs

Find suppliers that match your business model – i.e. product mix

Where Do I Start?





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Product Mix Overview

High-Mix / Low Volume

Active P/N’s: 50 – 1,000

EAU: 100 – 1,000 Per

Part #

Medium-Mix / Medium-Volume

Active P/N’s: 25 – 50

EAU: 1,000 – 300,000

Per Part #

Low-Mix / High-Volume

Active P/N’s: 5 – 25

EAU: 300,000 – 1,000,000+

Per Part #

EMS Approach to Product Mix





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Evaluate Suppliers on Three Key Process Capabilities

Administrative Processes – what is the suppliers order processing, purchasing practices, production planning, communication process?

Capabilities and Capacity – does the supplier meet your current and growth, quality, and technological requirements?

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?

Communication, Customer Service, & On-Time Delivery – Is the supplier responsive to your everyday needs and what is their system / processes that accommodate this requirement?

What Makes a Good EMS Partner?





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New Product Introduction (NPI) Capabilities

Domestic and offshore capabilities

Design, prototype, documentation, process development, ECO flexibility, and transition plan to production support

Good EMS Partner Cont…





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Resource Planning System

Inventory management production scheduling functionality

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

A robust process (software/people/procedures) that generates timely information for immediate action by front-line people

A system that identifies production gaps and balances supply with demand






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Excess & Obsolete – End-of-Life Materials Process

Inventory management that accurately tracks and maintains proper communication regarding E&O issues – this prevents substantial materials liability issues when established up front

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

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






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Make Your Decision on Total Cost vs. Price

Look at total acquisition cost and not the price alone – BOM, labor, test, after sales service, etc…

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

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

Look for a long-term partnership rather than a short-term price

Establish a formal cost reduction program with your suppliers






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Pro’s & Con’s For Outsourcing EMS

Pro’s Con’s

No capital investment Lack of total organizational control

Quicker time to market Potential communication / time zone barriers

Flexible production capacity & scalability

Responsible for offshore logistics / transportation requirements

NPI support resources Higher burdened labor rate / fixed overhead costs to manage

Lower total cost of ownership that converts fixed into variable costs





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Keys to SuccessWith Your EMS Supplier

Mutually complementary cultures / personalities

Processes in place to provide solutions

NPI capabilities

Domestic vs. offshore solutions

Resource planning system / process

Cost reduction plan

Inventory management processes established

Life cycle management plan

Quarterly business review process

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EMSIndustry

Background















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What is the EMS Industry?

Design

Printed circuit board assembly (PCBA)

System build / final assembly

Fulfillment / distribution services

After Sales Support

EMS or Electronic Manufacturing Services Today

1950's the printed wiring board and integrated circuit were invented by Texas Instruments and refined by others

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

Industry History / Background





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EMS Industry History

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

Turnkey solutions begin – labor, materials, and test Outsourcing migration – OEM’s sold off PCBA, PCB fab and other non-core

capabilities to CM's Wall Street – CM’s proved to be viable business model Services outsourced – Design, NPI, PCBA, test, materials, system build, end-of-life

functions began to be outsourced to CM's End-to-End – CM's begin to provide "end-to-end" global supply chain solutions

1990’s

Strategic Relationships Emerge

Industry referred to as "contract manufacturing" or "CM" industry

Primary focus on PCBA for commercial and defense OEM's

The vast majority of OEM's did their own PCBA in-house

Most OEM's consigned 100% of materials to CM's

1960’s – 1980’s

Traditional Supplier Relationships





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EMS Industry Background cont…

Industry changed name to EMS (Electronic Manufacturing Services)

100% turnkey of end-to-end solutions is standard from tier-1 through tier-3

All-in-one model is established in tier-1 through tier-3 Suppliers

Facilities and equipment are not the main differentiator anymore

Cost effective strong relationships are still king!

2000 Through Today

(Your Company) Has Positioned Itself to SupportOur Customer’s Future Strategic Needs

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CustomerSupport

Structure















Customer Focus Team

Customer

Program Manager (Single Point of

Contact)

Sales

Engineering

Test

Quality

Purchasing

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Questions

Date post:	21-Jan-2015
Category:	Technology
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How to Align With The Right EMS Provider

Technology