CEM SOURCING15
Where
in the
world?
OEMshaveanunprecedentedchoicewhenit
comestoselectingamanufacturingpartner.
Gettingitrightisakeystrategicdecisionthatcan
makeorbreakaproductinthemarket.
Manufacturinginahighcostlocation
unnecessarilygivescompetitorstheopportunity
toundercutwhilststillmaintainingahealthyprofit
margin.Equally,alongandunwieldylogistics
chaincanbehardtomanage,makingitdifficultto
respondflexiblytochangesinthemarketaswell
asaddingacostburdenofitsown.SimonTitman
fromTTElectronicsIntegratedmanufacturing
servicestellsustherightquestionstoaskwhen
sourcinganoutsourcedmanufacturingpartner.
Whereismycustomer? aproducttobetransferredfromsitetositeatminimalcostand
ThefirstquestionaglobalOEMwillnormallyaskwhenmakinga verylowrisk.Thesameproductcanevenbemanufacturedat
manufacturingdecisionis‘whereismycustomer’–butitisa multiplesites,tominimiseonwardshipmentcost.
questionthatsmallerOEMsaresimplynotusedto.Onaregional
scale,thecostofhavinggoodsintransittothecustomeris HowwillmyBOMcostbeaffected?
essentiallynegligible.AirfreightwithinEuropeisrelativelycheap, Alongsidetheoutboundsupplychainfrommanufacturinglocation
andforlargeitemsalorrycancrosstheentirecontinentinafew toendcustomer,theinboundsupplychainsupplyingthelocation
days.FromAsia,airfreightwillonlybeeconomicforthesmallest needstobeconsidered.Animplicitassumptiononthepartof
items–seafreighttakesweeks.Theconsequencesofthiscanbe customerslookingatoutsourcingtoAsiaisthatthecomponents
far-reachingforthestocklevelsoffinishedgoods.Whatimpact willbecheaperaswellasthelabour.Notnecessarily.Theprofileof
doesthisshipmenttimehaveonleadtimetothecustomer?What componentuseinAsiaisdrivenbyhighvolumeconsumer
happensifadesignchangeisneededbetweenthetimeof electronics,withtheresultthatpartsthatarereadilystockedby
manufactureandthetimeofdelivery? mostdistributorsinEuropemayonlybeavailabletospecialorder
inAsia–withapotentialimpactonpriceandlead-times.Working
Whendecidingwheretolocatemanufacturing,thefulllogistical withalocalpartnerthathasaglobalreachcanoftenassista
costneedstobecalculated.Inadditiontotheactualcostof customerinselectingnewsuppliersfortheirproductapproved 0
9
transportingandinsuringthegoods,thisshouldincludeany vendorlist(AVL),thusensuringthelowestcostwhentheproduct
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additionalinventorythatwillresultfromlengthytransittimes.For transfersoffshore.
innovativeandcomplexproducts,theriskofdesignchangesshould
beconsidered.Stocksoffinishedgoodsintransitcanturninto Whatistheacquisitioncostnow?
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stocksofwhiteelephantswithalarmingeasefollowinglate Thecentralcriterionusedbycompaniesoutsourcing,isusuallythe
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identificationofadesignissue. unitcost.Indoingsotheymissoutthemostimportantelementin
theoutsourcingselection–theacquisitioncost.Thisissimplythe
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HowmuchflexibilitydoIhave? totalcostofsupportingthelaunchofaproductinthe
Itisimportanttobearinmindthattheanswertothefirstquestion manufacturer’slocation,interfacingwiththenewmanufacturing
maynotbestableoverthewholelifeoftheproduct.Inayearorso, partnerandhavingtheproductdeliveredtotherequiredlocation.
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commoditisationmayputmarginsunderpressure–andthedesign ThemorecapabletheEMSpartneris,thelesstheacquisitioncost
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willhavestabilised,makingoutsourcingtoalowcosteconomy willbe.Byaskingthequestionsoutlinedabove,youwillbewellon
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moreattractivethanitwasattheoutset.Newmarketopportunities thewaytocalculatingthetrueacquisitioncostassociatedwithany
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mayevenhavedeveloped.Tier2globalCEMsaddressthis proposedmanufacturingpartner.
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challengewith‘mirror’sites–manufacturinglocationsintheUK,
China,Malaysiaandelsewherewithidenticalequipment,allowing > www.tt-electronics.com E
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