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 June of 2015 the race horse American Pharaoh accomplished what no thoroughbreds horse had accomplished since 1978 by winning the Triple Crown. Engineers today are striving to hit a different triple crown with every design….Smaller Footprint, more capabilities and lower overall system cost. When designing an embedded barcode solution, one option that may allow your engineering team to meet these challenges is to utilize an embedded scan engine. We will look at some of the additional value a scan engine can bring to your design over a fixed position reader.

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.

When an OEM partners with a supplier there are many levels and facets to the partnership.  A good partnership goes beyond just supplying components or assemblies to a purchase order.  When an OEM has a true partnership with a supplier they can rely on that supplier to provide them engineering support as well.  This support can have many different aspects to it.

Today more than ever manufacturers are learning the importance of being able to trace their products.  Sometimes knowing where and when the product was manufactured is sufficient but often a manufacturer must be able to trace sub-components and even raw materials back to the original source.  If your traceability requirements go beyond just place and time of final manufacturing and you need to reach back into your supply chain, partnering with a contract manufacturer that has the experience and systems to support traceability is critical.

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.

A difficult task for any company is reviewing bids and proposals for cables, harnesses, or electromechanical assemblies and determining the best to select.  The final cost, while key, is not the only important factor to consider. This is particularly true when proposals come from companies that are offering to complete the work at an offshore manufacturing facility.

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: