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Decision Making Process, Risk Management

Mitigating Risks with the Right EMS Provider

Outsourcing your manufacturing to an EMS provider sounds fantastic. The benefits are difficult to disregard: cutting overheads, boosting efficiency, and the chance to focus on your most important business areas. This post discusses the mitigation of the risks of this highly-desirable election.

Managing vendor risk is an on-going process. As your organization begins or continues on this journey, you will want to get the most benefit from the program and ensure that the information derived is used organization-wide in order to achieve the best decision-making.

Each of these elements plays a vital role in mitigation of risks:

  1. Supply Chain – In both minimizing liability and reducing overall costs, the supply chain must be flexible and closely monitored.
  2. Flexibility – Production equipment, floor layout and personnel cross-training contribute to maximized flexibility at minimal cost.
  3. Information Systems – Real-time information access is crucial.

Many OEMs expend time and resources identifying and eliminating risks in their supply chains. It is common for OEMs to rely on their electronics manufacturer services (EMS) providers to help them reduce risk. EMS providers are in a unique position in the supply chain, having many OEM customers and suppliers. With such a perspective on the supply chain, EMS providers are in a unique position to see potential supply disruptions before their OEM customers.

An EMS provider’s risks aren’t greater than an OEM, but more complex. Given the nature of the business, an EMS provider must combine components similar to the requirements of OEM customers. This involves different industries and purchasing a wide variety of parts and services, employing a large number of suppliers in diverse places.

One challenge to EMS providers is delivering the right solution. EMS providers must develop processes that work efficiently, but can be easily tailored to a variety of customer requirements and changes in each customer’s supply chain. In configure-to-order and/or highly inconsistent demand, this challenge is most evident. Given these circumstances, the primary focus for the EMS provider is:

    • To make sure designs can be manufactured and refined for Configure-to-Order;
    • To develop a forecast for planning material requirements;
    • To establish a supply chain willing to support smaller inventories with rapid response to demand changes; and
    • To come up with an efficient, timely manufacturing process in which the movements of materials through the process support unanticipated demand.

In a volatile economy such variations are difficult to predict. Being able to see such changeable elements is critical with management judgment and real-time information access being key. Most EMS providers manage 20 to 30 clients at the same time ERP systems are designed to provide an in-depth look at the actions occurring as production inputs are transformed to finished goods outputs.

The combination of good processes is foremost in the mitigation of risks. Trust, constant communication and teamwork are essential. When looking for an EMS provider, consider the team expertise and judgment regarding their management of projects of similar scope. EMS contractors must have systems and practices in place with high visibility for issues and a team to resolve these concerns as soon as possible to mitigate risks.

SMC presents a complete solution for your EMS, Wire Harness, and Systems Integration needs. SMC is dedicated to the 4 P-s—Principles, People, Process and Performance. We offer direct fulfillment to the end customer. At SMC, we are committed to a true, integrated partnership

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