Most companies in the EMS middle market believe they are paying too much for electronic materials and manufacturing services. Most of them are right.
Yet most suppliers to the EMS middle market believe they are charging too little for electronic materials and manufacturing services. Their margins are thin, and the value of the unexpected negatives usually exceeds the value of the unexpected positives.
Thus it is no surprise that the apparently never ending squabbles between middle market customers and their EMS suppliers routinely involve issues of price and cost. The finger pointing is rampant; the underlying data are either muddled, unavailable, or withheld; and the results are almost never satisfactory for either customer or supplier.
As both sides dig in their heels, the unresolved and emotion-charged issues of cost and price continue to fester; constructive communication becomes less rather than more; and the relationship commences a downward spiral that eventually results in an unhappy and costly ending. Or, short of that, it hobbles along under the auspices of begrudging acceptance or benign neglect. Either way, it’s an expensive story of opportunity lost.
The truth is that the costs, and therefore the prices, of nearly every electronic product contain opportunities for substantial and significant improvement. But, like anything worthwhile, making good on these opportunities requires well informed, clear-headed, and unrelenting persistence. Regrettably, in the highly pressurized rock and roll world of designing, building, and selling manufactured products, these are the very qualities in shortest supply. Serious and persistent cost down almost never happens.
That’s why AMI’s cost down services – expert and clear headed, well organized and precisely targeted, purposeful and independent – are almost always an excellent and powerful investment.
Although each engagement is different, here are summaries of the work that’s typically associated with AMI’s cost down services.
Benchmark Costing and Pricing: AMI prepares a full and complete costing work-up and mock price quotation for the subject product or products. The costing work-up includes unit cost and source detail from AMI’s suppliers at the part-number level, and time and process detail from AMI’s engineers at the cell level. The mock price quotation incorporates normative EMS industry margins for gross profit and net profit. In addition, the process yields preliminary cost down targets relative to alternative materials, vendors, processes, and design.
Comparative Analysis: AMI uses the results from its benchmark costing and pricing as critical reference points to perform and prepare a detailed part number by part number and cell by cell comparative analysis with the actual costs, time standards, and prices of the customer’s supplier. Meaningful differences are flagged for further exploration and understanding.
Structured Interviews: AMI conducts on-site structured interviews with pertinent selected personnel of both its customer and its customer’s supplier. These interviews focus on achieving full understanding of the most significant results of the comparative analysis; reviewing the efficacy of the preliminary cost down targets and alternatives presented through the benchmark costing and pricing process; and both introducing and soliciting open discussion and further understanding of pertinent and related issues and opportunities.
Actionable Recommendations: AMI prepares and presents to its customer a complete report that describes its findings, details a set of recommendations and an associated action plan, and lays out, item by item, both the per unit and annual savings that can and should be realized. Also included are an assessment and recommendations on alternative materials, vendors, processes, and design; a full and detailed set of benchmark costs and prices; and the same for the comparative analysis.
Depending on the requirements and circumstances of its customer, AMI can provide cost down services for one, several, or a complete set of products; for new products on an ad hoc basis; or over an extended schedule, wherein all products and all associated suppliers are addressed over the course of perhaps one or two year cycles.
AMI, with its unique capability to help customers reduce costs, is the right size and the best choice for the EMS middle market.