Yenom/ Pronology in EMS (IV)
Author：Gilbert Chen
Criteria to build production in Taiwan or China
Contract out is a trend of current industry. As soon as we’ll try to contract the products out, some issues need to be recognized as below.
●What’s the criteria to select a contractor?
●What’s the timing to contract the product out?
●What’s the production process to be contracted out?
●Where should we contract out the products?
●What’s the procedure to contract out?
●What organizations needed for transferring to a contractor?
●What’s the criteria to select a contractor?
●What’s the timing to contract the product out?
●What’s the production process to be contracted out?
●Where should we contract out the products?
●What’s the procedure to contract out?
●What organizations needed for transferring to a contractor?
1. What are the criteria to select a contractor?
- The organization of the contractor: Different structure has the advantages for various EMS types.
1.Several SMT/DIP lines, but fewer System production lines: Volume production for SMT/DIP only.
2.With SMT/DIP & system lines, but no ERP system & no PMC control system: High volume production
for whole system, but no turn-key.
3.With SMT/DIP, system lines & good PMC control system, but no ERP: Low to high volume production
for whole system, but no turn-key.
4.With SMT/DIP, system lines, PMC & ERP system: Low to high volume production and turn-key for whole system.
5.Including item 4 & good material approval system: High end turn-key products.
2.With SMT/DIP & system lines, but no ERP system & no PMC control system: High volume production
for whole system, but no turn-key.
3.With SMT/DIP, system lines & good PMC control system, but no ERP: Low to high volume production
for whole system, but no turn-key.
4.With SMT/DIP, system lines, PMC & ERP system: Low to high volume production and turn-key for whole system.
5.Including item 4 & good material approval system: High end turn-key products.
- Financial status:
Only profitable company can survive longer and provide good benefit to employees. Stable employees are the most important factor for good quality. The major factor to let employees stay in a company is good provision, good learning environment or good boss. Profitable is quite important for a company to supply the requirement that employees need. Also, it’s a important factor to let firm has money to do good services for customers.
- Future plan:
We always try to find a contractor who has the ambitious to grow up and can provide the services as our volume increased. Future plan is a major factor to see a company’s philosophy.
- Quality system:
I put the quality system at the last that doesn’t mean it’s not important. But, it can be improved. The items described above “quality system” are company’s vision and CEO’s strategy those are basic of success.
2. What’s the timing to contract the product out?
- Low volume production
To have a factory for low volume build is always not a good decision as below. To select a good contractor is the best choice.
* Overhead will be high for the total cost low turnover rate of material, space, equipment & manpower.
* Can’t build a good quality system, but low volume products are normally high end products. It needs
high end quality system.
* Can’t build a good quality system, but low volume products are normally high end products. It needs
high end quality system.
- Unstable volume production
It’s the most difficult factory type to handle the unstable production. 60/40 is a better solution for a volume company. That means 60% built internally and 40% contract out.
- Production is not a focus for our company
Some company started from product development. There are no management people in the team who are good at manufacturing. When the company set up a factory, it will become a burden to the core team.
- Big order under negotiation
Even a big company still has the capacity issue. A company will try to use 80-90% of company’s capacity normally. When there is a big order under negotiation, the current factory capacity will be an issue. To find a contractor is the easier way to solve the problem.
3. What’s the production process to be contracted out?
- SMT & DIP process:
* Test equipment is special. Not easy to setup outside.
* Confidential issues for system process. Don’t want to do testing and after process outside.
* Many customized configurations for the products.
* To maintain some of the manufacturing capability internally.
* To let costumer see product quality control internally.
* Confidential issues for system process. Don’t want to do testing and after process outside.
* Many customized configurations for the products.
* To maintain some of the manufacturing capability internally.
* To let costumer see product quality control internally.
-SMT, DIP & Testing:
* Don’t want to maintain too many technical repairing people internally.
* Many customized configurations for the products after testing. Hence, assembly & packing process build internally.
* Low volume & High mix for the process after testing. Hence, assembly & packing process build internally.
* To maintain some of the manufacturing capability internally.
* To let costumer see product quality control internally.
* Many customized configurations for the products after testing. Hence, assembly & packing process build internally.
* Low volume & High mix for the process after testing. Hence, assembly & packing process build internally.
* To maintain some of the manufacturing capability internally.
* To let costumer see product quality control internally.
-SMT, DIP, Testing & Assembly:
* Don’t want to maintain a big space to handle the assembly material.
* Same reason as testing 2,3,4,5.
* Same reason as testing 2,3,4,5.
-SMT, DIP, Testing, Assembly & Packing:
* It’s the easiest way to control manufacturing. All process are built outside.
* Customer factory visit will be in contractor.
* Trust is an important issue for this kind of operation.
-Material purchasing:
* Customer factory visit will be in contractor.
* Trust is an important issue for this kind of operation.
* The material turnover rate is about 60-90 days normally. As the contractor prepares material, the financial burden will transfer to contractor.
* Contractor will collect some customers’ common parts and speed up the turnover rate. Hence, Contractor can share the benefits with customer.
* Contractor will be better at the volume & schedule management of material.
* Contractor will collect some customers’ common parts and speed up the turnover rate. Hence, Contractor can share the benefits with customer.
* Contractor will be better at the volume & schedule management of material.
4. Where should we contract out the products
-Domestic:
* The product is not mature. Engineer needs to solve some technical issues while production.
* Product replaced speed is fast. Engineer should take care of the production always.
* Low volume and high end products. Engineer needs to watch the product’s quality frequently.
* Product replaced speed is fast. Engineer should take care of the production always.
* Low volume and high end products. Engineer needs to watch the product’s quality frequently.
-Taiwan:
* High end and low to middle volume products.
* Can do the ECOs transfer by mail or telecommunication.
* Complicated products.
* Can do the ECOs transfer by mail or telecommunication.
* Complicated products.
-China:
* Products designed in China.
* Middle to high volume products.
* Less ECO changed products
* Middle to high volume products.
* Less ECO changed products
5. What’s the procedure to contract out?
-Contractor survey:
* As Top of this article, there are some criteria to select a contractor.
-Quotation:
* As soon as we have the candidates of contractor, we’ll ask the contractor to do the quotation then.
* To provide required documents for the quotation. If we are not trust the candidate, we can sign NDA
with them.
* To negotiate the price with vendors, different contractor has their own counting way. Should know the
rule of each contractor for final decision.
* To provide required documents for the quotation. If we are not trust the candidate, we can sign NDA
with them.
* To negotiate the price with vendors, different contractor has their own counting way. Should know the
rule of each contractor for final decision.
-Trial run:
* After contractor finalized, Should do a trial run to ensure the system of contractor fit in our system.
* To structure the communication bridge between the two parties. It covers paper communication and
communication windows.
* To structure the communication bridge between the two parties. It covers paper communication and
communication windows.
-Mass production:
* To setup the communication system of production scheduling, document transfer, engineering bridge,
quality assurance.
* To setup the regular meeting setup with contractor.
quality assurance.
* To setup the regular meeting setup with contractor.
6. What organizations needed for transferring to a contractor?
-Production control:
* To plan the production schedule and get the consistent agreement internally.
* To communicate with contractor for all of the things. And be the coordinator for other teams.
* To communicate with contractor for all of the things. And be the coordinator for other teams.
-Engineering group:
* To do the products technical transfer.
* To arrange the documents for technical transfer.
* Engineering issues coordinator and window for problem resolving.
* To arrange the documents for technical transfer.
* Engineering issues coordinator and window for problem resolving.
-Quality assurance group:
* To solve the customer complain issues.
* Quality window to face customer and contractor.
* Review and control the quality status of contractor.
* Quality window to face customer and contractor.
* Review and control the quality status of contractor.
-Procurement:
* To buy the required material on time for production.
* To survey the vendor and consign the vendors to contractor if need.
* Help contractor to find the abnormal requirement material that can’t get from regular channel.
* To survey the vendor and consign the vendors to contractor if need.
* Help contractor to find the abnormal requirement material that can’t get from regular channel.
