Some OEMs, especially those with above average scale and product diversity, use multiple sources to manufacture their electronic products.
Although this approach has the advantage of eliminating concentration with a single supplier, in most applications one supplier builds a certain set of the customer’s products while one or more other suppliers build other distinct sets of the same customer’s products. Thus, despite the fact of multiple suppliers, there exists 100 per cent supplier concentration at the product level. This means, of course, that the customer has assumed the risk of granting product level monopolies to each of its suppliers. And supplier monopoly, as we all know, is an invitation for customer abuse.
Among the other disadvantages of product level supplier monopolies is that the approach squanders the opportunity for real time variable sourcing for the same product or products among an established set of suppliers. For example, if a given supplier has exceeded capacity – or for any other reason is unable to meet customer demand – then the option of simply and quickly having another supplier build more of the shorted products isn’t available. Similarly, if one supplier raises its price for one or more products, then there is no seamless option to quickly transfer all the demand for those products to the supplier or suppliers that haven’t raised prices for those products. And so on and so forth, the examples could fill a textbook.
Another telling disadvantage of multiple product level supplier monopolies concerns materials. For starters, consider the broadly accepted truth that purchasing power makes a difference when it comes to sourcing electronic materials; namely, that if two companies are sourcing essentially the same materials, the one with a $1 million annual spend for those materials will enjoy significantly lower prices than the one with a $100 thousand annual spend for those materials. Thus, a company that uses more than one source to manufacture its electronic products divides its purchasing power accordingly, and thereby dilutes the value of its relative scale.
In contrast, AMI’s Tool Kit for Multi-Sourced Manufacturing is a powerful opportunity for companies in the EMS middle market to optimize the advantages and minimize the disadvantages of using more than one source to manufacture their electronic products. The Tool Kit, summarized below, is comprised of purpose-specific applications of selected AMI service modules, which are each detailed elsewhere in this site.
Sourcing: Customers can use AMI’s materials sourcing services to achieve lower costs by consolidating to one supplier the materials purchasing power it had heretofore dispersed to more than one supplier. In so doing, they will also reacquire control of their materials supply chain and benefit from AMI’s policy of transparent costing, sourcing, and pricing. AMI can provide these services at a consolidated level either for the full BOM or for one or more sub-BOMs.
Kitting: Customers can use AMI’s materials kitting services to control and support either same-product or different-product manufacturing for one or more products at multiple manufacturing services suppliers. Per its customer’s instructions, and given its customer’s decisions concerning supplier capacity, performance, and pricing, AMI can direct and redirect scheduled kits from one manufacturing services supplier to another, and it can size and resize kit quantities similarly and accordingly. Thus, through AMI’s kitting services customers regain control of their supply chain and benefit from transitioning their manufacturing services suppliers from the status of monopolist to the status of competitor.
Engineering: AMI’s several engineering services can be combined to help its customer ensure uniform accountability to key performance metrics among its manufacturing services suppliers. AMI’s value engineering services ensure that costs and cost down benefits are standardized and uniformly utilized across all relevant suppliers; AMI’s process definition services ensure that the same products are built the same way by each of a customer’s manufacturing services suppliers; and AMI’s control and compliance services ensure that each of its customer’s manufacturing services suppliers builds products consistent with the customer’s engineering specifications and consistent with the requirements of its customer’s external compliance authorities.
Although these services deliver important benefits in their own right, they carry the added benefit of empowering AMI’s customer with the freedom to allocate and reallocate responsibility for manufacturing its products from one manufacturing services supplier to another.
AMI, with its unique and powerful tool kit for multi-sourced manufacturing, is the right size and the best choice for the EMS middle market.