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In today's highly competitive environment, global sourcing is no longer a competitive strategy; it is a standard practice. Understanding what it takes to truly do this successfully separates the industry leaders from the pretenders.
The Asian Shift
When the "Asian shift" in PCBs really began to take hold a few decades ago, it began with Japan, which was soon replaced by Taiwan, which was finally replaced by China. As this dynamic continues, one thing is certain: This international sourcing evolution will continue. To stay in the game, companies need to develop a global sourcing strategy to remain relevant and sustainable.
The challenges of developing a robust domestic PCB supply chain is daunting enough but moving onto the international stage presents a whole new degree of difficulty that most companies are not equipped to manage. Typically, only the biggest companies have the resources to do this on their own. Identifying potential global suppliers, traveling to audit the suppliers, and the ongoing supplier management is not only cost prohibitive for smaller organizations, but they usually don’t have the expertise to manage this in-house. This is where the value of selecting a global sourcing partner becomes crystal clear.
The Broker Approach
The previously mentioned Asian shift created an overabundance of glorified PCB brokers that would be the conduit for companies to procure PCBs from global suppliers. For some organizations this approach provides a lower cost PCB supply chain that they would not otherwise have access to. However, this approach also comes with significant risk. One concern is that the broker has not done any due diligence on the suppliers they use, and in many cases have not even visited them, much less audited the suppliers. Selecting international suppliers to build your product based solely on unit price is a recipe for disaster. Another concern is that brokers typically do not have the level of technical expertise that most customers are looking for. One of the biggest disadvantages is that there is usually a major disconnect between what a broker is looking for in a supplier and what the end user is looking for.
Avoiding supply chain risk is the primary reason for choosing a value-add global sourcing partner over a broker. These organizations pride themselves on their due diligence, actually visit and audit the suppliers they will be placing your product with, and actively manage the suppliers on your behalf. Some of the benefits of this approach include:
The right global sourcing partner will already have an established stable of approved suppliers to choose from for your business. Suppliers should consist of a limited number of trusted suppliers who represent a best-fit match for customers’ needs. They don’t source on price; they will have audited their supply base, established relationships with each supplier’s senior management, and have a proven track record of their performance to be able to match the right supplier to your individual business.
Real Time Communication
The big companies and will tell you about the weekly supplier conference calls and online meetings that have to take place in the middle of the night for talk to someone on the other side of the world. Technical questions are always part of PCB life and being able to pick up the phone and talk to your partner during regular business hours is a huge convenience. Let your partner be the ones to interact with the suppliers at 10 pm or 3 am to keep your product moving.
Value-add partners will be able to aggregate the spend with their global suppliers to achieve much better pricing than an individual company would be able to do on their own. It is simple economics; the more overall business available to the supplier, the lower their pricing will be across all of the partner’s business.
The same principle applies with regard to leverage; most individual companies would be a very small fish in a very large China pond if they were on their own. The value-add partner has exponential leverage to get things done when a delivery date needs to be moved up, or in the event of recovering from a delivery or quality issue. Having a partner that can call the president of your China supplier to work an issue will become invaluable to you and is something that would be unlikely to happen on your own.
One of the most often overlooked aspect of utilizing a value-add global sourcing partner is that you only have to identify, qualify and manage a single supplier. Many suppliers, especially in Asia, are very technology specific and a company would most likely have to manage many suppliers to cover all of their technology needs. The good value-add global sourcing partners will have multiple potential suppliers for each and every one of your technological needs—in other words, a one-stop shop for all your PCB needs.
Additional Value-Add Services
Many global sourcing partners offer additional services such as engineering support, CAM review of the customer data, and final inspection of the PCBs before you receive them. Some have these capabilities at their U.S. facilities and others have embedded direct employees at their international suppliers to streamline the process. Either way, this is a value-add to your process.
The challenge of identifying new suppliers, reviewing new products with existing suppliers, negotiating contracts and confirming timely supplier production runs is a complex and difficult task. Add in today’s international sourcing structure involving many parties—often globally dispersed with weak lines of communication—and product launches can face high risks of failure, missed deadlines, and high costs. This is where the ROI of working with a value-add global sourcing partner can truly provide a competitive advantage.
Dan Thau is president and CEO of Millennium Circuits Ltd.