An Improved Process for Electronic Supplier Selection FI 1

An Improved Process for Electronic Supplier Selection

By The MacroFab Team  |  July 29, 2019

The process of selecting a supplier or contractor for electronic manufacturing varies in its execution among companies. Large companies typically have a well-structured and documented process to engage the necessary departments that have an interest in the selection process. Small companies are not generally as structured but the elements of procurement and engineering are still key to making a decision regarding the contract manufacturer. While there are usually other departments that give input to the selection process, this article is meant to focus on the aspect of effectively selecting a supplier that satisfies the objectives of both procurement and engineering departments.

Conflicting Goals

Procurement departments focus their energy on the selection and development of long-term suppliers. The ultimate reason for this is to establish relationships which result in better PCB assembly costs and stable supply chains. As a result, procurement departments are hesitant to bring in new suppliers and would rather focus on working with suppliers in their existing supply base to reduce costs. Departmental objectives are often focused on minimizing the overall supply base while focusing on component costs. While this can be an effective strategy there are some fundamental underlying assumptions that can add significant indirect costs.

An Improved Process for Electronic Supplier Selection 1

An Improved Process for Electronic Supplier Selection 1

Engineering is involved in developing new and innovative projects. Often, the innovation requires an improved process or specific competency that is absent in the existing legacy supply base. Very early in the development, engineering needs to identify critical characteristics and NUDs (new, unique and difficult elements). These NUDs are identified early in the process so they can be controlled. As a design moves to the production phase, it is reasonable to assume that a NUD will present problems as opposed to every day, well-understood characteristics of the design.

At the completion of the product’s prototype phase, both departments often make assumptions that can prove costly throughout the remaining development process. Procurement often believes that all contract manufacturers have the same, or similar, capabilities and specific competencies. This leads the procurement team to focus more on the component cost objective rather than supplier capability. Engineering, on the other hand, will complete the prototype design under the belief that procurement understands the critical design elements and will only bring suppliers into the process which are capable of addressing these elements. This can be further complicated by the fact that most of the initial design is completed with little procurement involvement, thus proceeding without regard or understanding the capabilities of the existing supply base.

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The assumptions, varying objectives, and lack of engagement between these two departments in the early phases of product development lead to a sub-optimized selection process of suppliers. As a result, both departments find themselves compromising and taking on additional tasks to find a mutually agreeable supplier. Procurement finds themselves engaging with the supply base to explore capabilities that were not previously known or evaluated. They often find that even if the existing supply base has the required capability, there is an effect on the existing and well-understood costing model. Engineering will typically find themselves modifying the PCB design or layout to work more effectively with the existing supply base or obtain better pricing.

An Improved Process for Electronic Supplier Selection 2

An Improved Process for Electronic Supplier Selection 2

An improved selection process would accomplish the following:

  • Procurement and engineering engagement during the prototype phase
  • Understanding of departmental objectives during the initial prototype phase (NUDs, cost, agency approvals….etc…)
  • Early and ongoing understanding of the assembled PCB cost based on volume

Making the Process Better

MacroFab has modeled our contract manufacturing business with these needs in mind. MacroFab’s online tools allow for the uploading of native PCB design files or Gerber design files. The online BOM tool allows for easy management of part selection, lead times, and alternative parts. Component stock and pricing are visible reducing lead time surprises and cost. Instantly generated quotes allow a transparent look into the price of each component as well as the labor attributed to the placement and assembly of the part. The design team can estimate a reliable cost much earlier in the process while having a better understanding of the cost drivers.

This enables the cost of the design to be effectively tracked throughout the entire development process. Both procurement and engineering can target cost drivers and devise better strategies to control them. Additionally, the MacroFab platform allows price analysis at any volume. If your design volume is higher than typical distributor (Digikey, mouser…etc…) volumes, MacroFab will engage with the component manufacturer(s) directly to obtain better pricing. This saves a tremendous amount of time and money for procurement groups.

An Improved Process for Electronic Supplier Selection 3

An Improved Process for Electronic Supplier Selection 3

Additional value-added activities help to reduce indirect costs associated with product assembly. MacroFab can engage with your design group during the prototyping phase and provide feedback on how to improve the design to meet your specific objectives. These services provide a more seamless and risk-free transition to the pilot and manufacturing phases of the design. Non-recurring engineering (NRE) can be reduced with the added engagement of all parties earlier in the process. Quality is improved by matching the design with manufacturing capabilities. Finally, lead times are reduced using onshore manufacturing and stock components.

MacroFab would like the opportunity to discuss the specific design challenges with you and your company. We believe our tools and processes can be utilized to help you meet your objectives more effectively than ever before. We welcome the opportunity to have an exploratory call with your procurement and engineering departments to discover how MacroFab can help you!

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