The RESCO Electronics Blog

The concept of total cost of ownership or “TCO” is to determine a product’s true cost not just based on the price but on all the costs it takes to purchase and maintain the product during the entire time it is owned.  This is hardly a new concept and most of us apply it in our personal lives, knowingly or not, each time we make a major purchase.  For example, when we buy a car we want to know the price of the new car, the trade in allowance on our old car, the taxes at time of purchase, ongoing taxes and insurance, gas mileage, maintenance costs, and maybe even the amount we can sell it for when we are ready for another.  In fact, almost all of the on-line car research sites (Edmunds, Kelly Blue Book, and Consumer Reports to name a few) calculate the expected TCO for about every model out there.  There is little doubt that TCO is an effective tool when making a purchase decision on a major, long-lived asset…but is the concept equally effective when comparing competing offers from material suppliers?

In a blog posted last spring on this website titled "When Does Contract Manufacturing in Mexico Make Sense" Fred Morr provided a great review of the circumstances our experience has shown that selecting a contract manufacturer with production in Mexico is the most advantageous.  Fred compared and contrasted domestic contract manufacturing with production in Asia and Mexico.  He included a simple table which I am providing again below that is a great first pass reference tool.  If you haven’t had a chance to read this blog I encourage you to do so.

As you may be aware, on May 4, 2015, RESCO announced its merger with J-Rad Technical Services. J-Rad is a thirty-year-old manufacturer of cable harnesses and assemblies based in Spartanburg, South Carolina. With the addition of J-Rad to the RESCO family, we welcome new customers, an outstanding staff and expanded capabilities. We believe it is these expanded capabilities that will have the most significant long-term benefit to all of our customers.

In many respects a company is like a person. Just like a person, a company (or any other organization for that matter) is born, grows, ages, and eventually dies. Although some companies, the longest-lived companies, find ways to re-invent themselves and extend their lives. Some manage to re-invent themselves time and time again and persist for very long periods of time (think Walt Disney, Wal-Mart, or Procter & Gamble).   In “Built to Last” authors Jim Collins and Jerry Porras studied why some companies are able to continually re-invent themselves and prosper while others’ lives are short and success modest.  What they found is that these long-lived companies all share a common trait; that of having a strong core ideology. This doesn’t mean that they shared the same core ideology, but rather they share the trait of having their own strongly-held core ideology that has remained consent through time.

Today there is more pressure than ever on product design and procurement professionals. The 2014 GEP Trend Report on Strategic Sourcing & Procurement highlights that those pressures are only going to increase.

While the survey itself was geared to sourcing, design engineers are under the same pressure.  As we reference below, speeding up new product introductions is critical to the long-term success of OEMs.  Identifying the best components and suppliers can go a long way to making that a reality.

Not only are OEMs under a mandate to reduce the cost of their products, they’re also charged with improving product quality and capability at the same time.  What’s more is that the rate of change and complexity only seems to be increasing.

In Part 1 of this blog I discussed the importance of having a well-defined process for selecting an electromechanical contract manufacturer.  In that blog, I emphasized that sticking to such a process would help avoid hasty, poorly informed decisions.  In this blog I share key attributes of contract manufacturers that you should consider as you narrow your list and make a selection.  

Important Considerations as You Narrow the List

Every company’s needs are different but many supplier requirements seem to always be important.  Among these are:

1. Manufacturing Flexibility and Cost.

         Multiple Locations. 

• Multi-location contract manufacturers are inherently more flexible than those with a single facility.
• Multi-location manufacturers also have built-in redundancy in their operations; they are much less likely to suffer a single catastrophic event that halts production.

There are many good reasons for changing electromechanical contract manufacturers, but that doesn’t make the transition any easier. Valuable time goes into researching and evaluating potential manufacturers, establishing relationships, and defining expectations. Trends like outsourcing and lean supply chains have boosted business efficiency, but these benefits can only be realized with the right manufacturing partners. Which is why finding the right partners is essential.

Contract manufacturing partners must be reliable, competent, and qualified and meet targeted financial goals. When a partner’s services are unreliable or subpar, it’s time to evaluate outsourcing options. Indicators that a contract manufacturer change may be needed include if the contractor:

How Procurement Professionals Can Successfully Navigate Trends Impacting Manufacturing

In our most recent blog, we discussed four emerging manufacturing trends and their impacts on procurement professionals. The challenges may be well understood, but what are the solutions for navigating a changing industry? While various solutions exist, we hope to provide a few insightful, experience-based suggestions for success. First, a quick recap of the trends:

Four trends in manufacturing, and the pressure they place on procurement professionals. 

Emerging manufacturing trends are placing new pressures on procurement professionals, and, according to the 2014 GEP Report, demand on procurement professionals is expected to rise. Businesses hope to add strategic value through cost savings and supplier driven innovation, and who better to enact innovation than procurement professionals. Over the past few years, leading organizations have shifted their procurement approach from a cost to a profit centered perspective. The result is a focus on value levers in both strategic and tactical procurement areas. Procurement obviously has much to offer in helping businesses achieve their objectives in an uncertain and multifaceted market but not only are procurement professionals expected to do more with less, they are also gaining responsibility for strategically guiding management decisions.

Through RESCO’s extensive work with procurement professionals, we’ve noticed four current and emerging trends that are changing the face of manufacturing and distribution. Navigating through these initiatives as they relate to individual organizations can be difficult, and we hope to offer insights and solutions that may help. This blog will review the manufacturing trends briefly and address how they impact procurement professionals. In a following blog, we will provide our own solutions for remaining resilient in the face of emerging trends.