How to buy off your supplier's pricing, if you are from OEM

    This is a simple guide to buy off a contract manufacturer's price.... if you are outsourcing your products for someone to build. 

It is a simple guide that I would like to share. And it also has a simple process flow on how things could be done. 

Why I wrote this blog? I noticed that there are OEM folks that might not be at the competitive position to negotiate with their suppliers. Thus, they could not negotiate for a better pricing & be competitive with their competitors. 

Below is a mindmap guide as an overview, in JPEG form. I do have the PDF copy. 

Here are the details in point forms. If you would like a well formatted copy, please email me.

 How to buy off a supplier's pricing, if you are from OEM

o Pre-requisite

 You are involved in supplier pricing

 You are from OEM

 You need to approve pricing

o What do you need?

 A few suppliers

 A business or a purpose

 An RFQ package

 Complete BOM & spec package

 Manufacturing flow

 Test requirements

• ICT or Flying Probe

• BST?

• Functional test

• System Test

 Quality requirement

 Annual volume

 RFQ timeline overall

 Sample products or pictures

o What are the catchy items

 Incorrect costed BOM

 Incorrect UOM

 Incorrect labor assumptions

o General Process Flow

 Identify business/opportunity

• Identify potential contract manufacturers for RFQ

o Reach out to the CMs

 Confirm interested, send RFQ

• Info

o BOM & specs

o Quality requirement

o Manufacturing flow

o Timeline

o Test requirement

o Any materials with contract pricing?

 Provide the list

• Provide a specific format for RFQ

o Organize a Q&A session with suppliers

 All questions answered

 Suppliers worked on RFQ package

 Follow up with suppliers for RFQ status

 Suppliers to submit RFQ

 Review & buy off

o If ok, business award

o Start project? 

o Transfer project

o Qualification plan

 Once approved, full business award granted

o How to review? 

 Check BOM

• Part numbers

o CPN

o MPN

o Description

• Qty per

• UOM

 Obtain internal costed BOM

• For comparison purposes

 Check process flow from suppliers

 Check suppliers' committed capacity

 Labor cost

• Cost per component price?

o Depends on

 EAU

 Complexity of product

 Stability of design

 Items to consider? 

• Shop rate

o Building space needed

 Depreciation period

 Depreciation cost

o Water & electricity

o Total equipment cost

 Depreciation period

o Labor required

 DL

 IDL

o Wastage

o Effective working hours

o Manufacturing process

 Clean?

 Non clean? 

 Cleanroom requirement?

 Conformal coating

o Rework rate

• EAU

• Number of heads used

o To see if there is duplicated stations

• Where are the bottlenecks

• Suppliers ROCE %

• SPI?

• SG&A cost

• Inco terms

 

If you would like to have more on the strategy, please email me. I can share more on how to catch where the contract manufacturer hides their fat, and what are the items to look at. 

Hope you enjoy this. 

As usual, please email me if you have additional comments or request. Your feedback is highly appreciated.

Thank you & best regards,

Ronald Gan

Quotation Process for Contract Manufacturing.... an example

     This is an example of how a quotation process is for contract manufacturing environment. 

    There are multiple systems used in the market for contract manufacturers. Some of them are using off the shelf product to carry out a quote. While others may have developed internal system to manage this process. Of course there are pros & cons for these 2 options. Can you list a few?  

    The below picture suggest the first part of the quotation process flow. The second part of the quotation process is actually listed in my earlier blog, named "new business buy off".

   

    There might be technical terms used. Please email me if you have any questions. This could be a basic start for you to learn how to know the whole quotation process works in an EMS industry. 

    Just one additional note, this process can also be used for any major ECO (engineering change order) re-quote. 

    Hope this helps you understand a little bit more on the quotation process in an EMS industry. As usual, I appreciate your feedback & comments. If you need a PDF copy, please email me. 

Thanks. 

Best regards,

Ronald Gan