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So many times we hear that an EMS company and their potential new customer want to have a partnership where each side can have a very open dialogue of what is going well and what needs improvement. At the end of these discussions, both sides typically leave feeling warm and fuzzy, and ready to hold hands into the sunset. Then, the rubber hits the road and you start dealing with the real world. As a customer of the EMS world, it is important to know two things when searching for your future partner.
First, what are you looking for in an EMS partnership? As you develop this thought, keep in mind that you are the customer of a provider of custom manufacturing services. That means that you get to define the level of partnership, and it is up to the EMS company to meet those requirements. That being said, most OEMs are looking for a company that will function as an extension of their own company. This means an open line of communication, access to the right people at the right time, and sharing improvements in every aspect of the relationship. In this day and age, those expectations are very realistic, as long as you pick the right partner. That brings us to the next factor to keep in mind when looking for your future partner: What qualities should an OEM look for when picking an EMS company?
Below is a list of 10 items that you should look for in an EMS company. No, this is not a complete list, but they are questions that should be asked first. Each OEM is unique; therefore, each will have a unique list of requirements. However, the following is a good starting point for OEMs of all sizes.
- Choose a partner that has one level of certifications above what you actually need. For example, every production customer should require ISO-13485 for its traceability aspects even if you’re not a medical company. While the certification may not be required for your particular product, it does ensure that the prospective EMS company has good traceability processes certified by an outside firm.
- Consider in-house test capability, meaning not only the ability to perform test, but the ability to design and produce custom test solutions for your product. It is clear that a well-tested product is a reliable product. Your future EMS company should be proactive in the test development and improvement of your product. Doing so will mean improving their company while building a better product for you.
- Customer service matters. Find a facility that gives you a constant point of contact, other than the owner or a salesperson. In a perfect world, direct communication should occur through all of the major steps of the process. This promotes a rapid response time and transparency. So many organizations communicate through a single person, which creates bureaucratic log jam. If engineering, supply chain or test has a question, they should be empowered with the correct contacts and authority to go directly to the appropriate contact to ask the question. You then can follow through by updating the process notes and answering the question.
- Your vendor’s technology roadmap should be ahead of your own. In the EMS world, the company that is not reinvesting is stagnant, and just as you would not want to drink from a stagnant pond, nor do you want to enter into a long-term relationship with a stagnant company.
- Don’t be a little fish in a big pond. Pick a CM that fits your needs. Put extreme high-volume with a Tier 1; put the lower volumes with a Tier 2 or 3 depending on your comfort level, even if you’re a big OEM. So many times you will see a billion-dollar OEM only want to do business with a billion-dollar EMS provider, and will make that the law of the land for all of the divisions—a one-size-fits-all approach. While that approach might work well with baseball hats, it doesn’t with electronic manufacturing. Those billion-dollar OEMs have technology, quantities and unique requirements that require an EMS company uniquely situated to meet them. At the same time, startups do not need to go to a Tier 1 supplier to impress a potential investor. In fact, the partnership will help woo your investor as part of your team, not a faceless vendor.
- Ensure that good data systems are in place. Not only redundancy, but proper systems in place that protect your IP and, if required, ITAR. Does your potential partner have the best firewall, virus protection and data backup plan? Have these plans been tested and reviewed? So many times EMS companies are very focused on the latest manufacturing equipment that their back office gets left behind. In the world of Industry 4.0, the network and data systems are the equivalent to the central nervous system, bringing everything together to operate as one.
- Look for an established quality system, with a 12 month or longer track record. As basic as this seems, it is critical to know that the EMS partner has experience on their systems and an auditable history of successful follow through.
- Take a look at the financial stability. Make sure that they will be here for the long run. A key indicator is reinvestment in the latest equipment and technology. Look for a long-term plan for equipment and understand why they chose the make and model of the major pieces of equipment. Find the door if all you see is newly acquired used equipment. While buying an occasional used piece of equipment makes sense, some companies will buy only used without a long range plan, jumping to whatever they can find on the market. This means that they lack a relationship and support from the manufacturer. Run a D&B and review it with their CFO or controller. Talk to the major component distributors because they can tell you who is doing well and who isn’t. Keep in mind, this is an assurance of supply issue; no credit means no raw materials, and no raw materials means no product for you!
- Examine their employee relations. Pick a non-union facility that focuses on employee growth and benefits, creating long tenures. Little perks matter, like sports tickets. Some will hire and terminate based on demands. In those cases, training will be suspect. Consistency from any company means keeping employees for the long haul, and having good training programs. You are looking for a long-term relationship, and the quickest way to know if the EMS company looks for the same is to understand their employees’ tenure. When you tour the facility, ask to see the breakroom and other employee areas, ask the employees what they like about working there and how long they have been with the company. Then ask yourself, “Would I want to work here?”
- Look for a good industry and customer mix. Make sure there isn’t a hyper focus on one industry or customer, which could cause issues if that industry hits hard times. For example, automotive or, more recently, oil and gas. There is a saying in football, “you can live by the blitz or die by the blitz.” The problem with companies that are heavily weighted in an industry or customer is twofold. First, the EMS company’s priority will be with that customer or industry, causing you to be second fiddle at some point. Second, and most importantly, business cycles, buyouts and relationships change, a heavy concentration combined with a big negative swing in these areas will put the EMS company at risk.
To read this entire article, which appeared in the October 2016 issue of SMT Magazine, click here.