How does an EMS provider decide which OEMs to partner with?

Once an Original Equipment Manufacturer (OEM) has made the decision to outsource their electronics manufacturing the next step for them is to find a suitable partner. And there’s certainly a lot of choice; according to the latest Reed Electronics Research report there are circa 250 Electronics Manufacturing Services (EMS) companies operating in the UK.

So finding an EMS partner should be easy, right? Not necessarily say JJS Manufacturing. Much depends on what the OEM is hoping to achieve from their outsourcing project and whether these expectations match with the EMS provider’s own strategy.

Start with why

One of the first questions an EMS provider will try and answer when an OEM makes contact is why? Why have they sent the enquiry to us and why now? Quoting new projects can be time consuming for the EMS provider and often involves resource from the Account Management, Purchasing and Engineering teams. So unless the EMS provider is over staffed or desperate for work (both of which should ring alarm bells) they will want to make sure they direct internal resource in the right areas.

In addition, the EMS provider will probably want to understand why they have been chosen as a potential partner. Was it the result of months of detailed research by the OEM? Or have they been sent the same enquiry as ten other suppliers and whichever submits the cheapest price back will win the business?

 

And finally, the EMS provider will want to understand how much of the OEMs supply chain, manufacturing and test operation they are planning to outsource. Which elements will they retain and why?

Whatever the reasons, a good EMS provider will want to understand where they sit in the OEMs outsourcing strategy, the timescales involved and why they have been invited to quote in the first place.

Money in the bank

A key thing for OEMs to check when researching potential EMS providers is financial stability. If they are about to hand over part, or all of their supply chain, manufacturing and test operation they quite rightly want reassurance that the EMS provider can finance their project. Of course, the same rules apply to EMS providers when potential new clients approach them.

A good EMS provider is likely to run credit checks on any OEM that makes contact prior to moving forward with their request for quote. And if they spot anomalies in the figures they are likely to probe further to make sure the OEM has the ability to pay for the manufacturing and test services they have requested.

 

Volumes and complexity

The majority of UK EMS companies are set up to manufacture in low to medium volumes; although a few have access to low cost region facilities and can offer higher production runs. Complexity on the other hand varies with some UK EMS providers happy to produce very simple printed circuit board assemblies (PCBAs) with a relatively small number of electronic components. Other assembly partners will prefer to manufacture PCBAs that have hundreds, if not thousands of different parts and then fit them into a sub assembly or finished unit.

Likewise, some EMS companies are set up to support prototype quantities and will be very happy to produce small quantities while the OEM establishes the product on the market. However, once the product takes off they might struggle with the production volumes and fail to meet the increase in demand.

Other EMS providers might prefer to get involved with an OEM once the design is a little more stable and the prototypes have been proved out in the market. That’s not to say they won’t be able to help in the early stages, offering Design for Manufacture (DfM) support for example, but will have set their operation up to consistently deliver quality product on a monthly basis.

A quick scan of the EMS provider’s ‘About us’ webpage should tell the OEM where their ‘sweet spot’ lies and whether or not they have the capacity and experience to manage the volumes and complexities the OEM is looking for.

Market match?

On receipt of an enquiry the EMS provider will check what market sector the OEM sells into. The majority of EMS companies advertise on their websites the sectors they have experience supplying into. Some focus on a relatively small number, others cast their nets far and wide.

Our advice to OEMs has always been to partner with an EMS provider that can demonstrate working knowledge and experience in the same market sectors as the OEM. That’s not to say EMS companies that don’t have existing customers in a particular area can’t help, it’s just that the ‘fit’ might not be quite as good.

 

It’s not you, it’s me

Sometimes relationships between two companies don’t work out, it just wasn’t meant to be. And it’s often better to find this out early on before either party commits time and effort trying to get things moving. Outsourcing is no different. Although the OEM may think they have found the perfect EMS provider, their strategy, product or market sector may not fit with what the EMS is looking for.

The best EMS providers will be clear with the OEM upfront. They will explain why they don’t feel the OEMs project or strategy is right for them. If they can’t see how they can add real value to the OEM then it doesn’t make much sense to continue things further.

Although this might not be the response the OEM wants to hear, they at least have the opportunity to move forward and find someone else that can help without wasting a huge amount of time and effort.

Hopefully this insight into some of the questions, checks and balances good EMS providers carry out has been useful? In such a competitive environment it’s hard for any EMS provider to turn away business. But business is business, just that, and turning down an outsourcing project is never personal. And of course, as with any relationship things change over time. The EMS provider that originally declined to bid because they couldn’t add value to the OEMs business originally might be exactly the right partner on a different project or if a change in strategy has taken place.