BOM COSTING IS THE STRATEGIC ACTIVITY OF ALL Electronic Manufacturing Services Companies
IT’S NO SECRET: BEING THE FIRST ONE TO DELIVER A QUOTE TO A CUSTOMER IS A KEY FACTOR OF SUCCESS.
Some EMS companies go as far as saying it raises their chances of winning a deal up to 80%. The target lead time for submitting a quotation to the customer is around two weeks. Whilst this can be achieved every now and then, consistantly doing so is far more difficult.
Quote lead times expected by the customer are always shorter. More and more often, they expect them to be less than 1 week.
DIFFERENT USE CASE SCENARIOS
For a prototype, it is the lead time to provide a quotation which is most important to the customer.
For mass production, it is the price which will be key.
At the early stages of product design, when management teams need to evaluate the cost of different technical solutions, quotation request may sometimes only be a simple cost evaluation exercise.
In a benchmarking scenario, it is the comparison of quotations which is the major criteria for selection.
DIFFERENT ORGANIZATIONS
The sourcing team may be organized either by project sourcer or by commodity sourcer.
A project sourcer needs to be able to expertly manage the work load, whilst the split by commodity will require more coordination and attention to details when consolidating the workload that was originally split.
BOM COSTING: THANKLESS WORK
People in charge of BOM costing spend a lot of energy trying to provide quotations as fast as possible, sending RFQs to all suppliers, chasing them, collecting huge amounts of data, summerizing information… All of this, to be told: “The cost is too high!”, “It’s too late” or “We need you to quote another quantity”. Whilst sourcers are essential to BOM costing, they would rather be working on sourcing, analyzing and negotiating instead of gathering and handling data. Management needs to find a solution that allows sourcers to carry out value added activities and still deliver costings as fast as possible.
WHY APPLY A DIFFERENTIATED APPROACH?
Throughout the development process, it is a necessity to evaluate product costs manufacturing. EMS companies are faced with two problems: 1) Working on BOM costing within very short lead time to meet customers’ expectations. 2) Setting up a purchasing strategy to meet company’s performance and profit requirements. In addition, short manufacturing lead time expectations ask for an accurate control of inventory and procurement delay. To succeed, it’s essential to apply a differentiated approach, which consists of using the appropriate tool for each specific cases.
To succeed, it’s necessary to apply a differentiated approach, which consists in using the appropriate tool for each specific case.
COMPLEX CONCERNS ALL ALONG THE PROCESS
BOM COSTING PROCESS CAN BE SUMMARIZED INTO 5 STEPS
THERE ARE SEVERAL CONCERNS ALL ALONG THE PROCESS AMONG WHICH:
- MULTIPLE BOM TYPES
There is as many BOM type as customers, some with only manufacturer reference, some with multiple sources; organized in rows or columns. A preliminary work is necessary to standardize all those data
- SEARCH FOR EXISTING PRICES
In order to save time, quoting team use to search for existing price in their ERP, based on manufacturer references or customer references. This process is time consuming and tedious.
- CUSTOMER AML: A MAJOR STAKE
Some customer will provide their Available Manufacturer List (AML), other will expect the EMS to take care of the source qualification. On any case, control the qualified sources precisely is a major stake for the quality, and also for strategic sourcing.
- SUPPLIER RFQ
A lot of suppliers will be involved in the RFQ process. It’s better to send to them only the part they need to quote; the ones matching their line card or their commodity. Otherwise their quoting lead-time will be longer. Monitoring all the RFQ sent to the supplier appear to be a concern for the sourcing team.
- MARGIN CONTROL, OPEN BOM QUOTATION
More and more customers require to have the BOM cost breakdown for each component. This represent an additional workload and also require a precise price control from one quote to the other.