How do companies find a suitable EMS service provider?

1. define the supplier market.

Printed circuit board assemblers or providers of electronic manufacturing services are an indispensable link in the value chain in the automotive sector, medical technology and many other industries. To find a suitable provider, you first need to get a market overview of the various service providers.

First of all, you should determine suitable selection criteria to narrow down where you want to research potential service providers. It is not possible to say in general terms what these criteria are. Depending on the area in which you are active and the goals your company is pursuing, the selection of criteria may vary.

For example, the following criteria could be important:

• Qualification
• Manufacturing capacity
• Preissegment
• Level an technischem Support
• Größe des Einkaufsvolumens
• Automotive-Experience
• Customer industries

So think about, what makes a suitable EMS supplier for you. By selecting and weighting the categories, you define the market for electronics manufacturing services for yourself.

2. Define the requirements profile of the service provider.

Next, develop a requirements profile of the service provider based on the planned component group and its scope of production at the supplier. Here you should consider whether you only want pure PCB assembly (i.e. PCBA or printed circuit board and assembly) or also subsequent assembly (i.e. PCBA and final assembly). Some manufacturing service providers only offer PCB assembly, while others also offer final assembly.

So if you are looking for a supplier who assembles PCBs and fixes them in a metal housing, for example, on which various connector outlets are mounted, but you have to maintain a certain overall size and the component must meet certain requirements (e.g. vibration), a supplier who only assembles the PCB will not be sufficient. In this case, you will need an EMS supplier who also offers assembly and possibly also development.

If you also intend to involve the EMS service provider in your development process to optimize your own electronics production, you should also pay attention to development expertise and technical understanding when defining the requirements profile. It is also advisable to clearly define the scope that the manufacturing service provider would have to take on beyond the mere assembly of the PCB. For example, it should be clear whether and which development services should also be offered, and whether the supplier would like to provide these themselves or outsource them.

3. Generate a supplier shortlist.

After defining all the necessary criteria, you can carry out a market research and obtain a targeted market overview. The following approach makes sense:

1. Compile a list of all EMS service providers. It can be useful to use industry-standard rankings, which are often compiled every year. Such rankings can be found using special supplier search engines, but also if you google "top ems-dienstleister" or something similar. Of course, these are only initial indications. This does not mean that the ranking list corresponds to an actual competence in the production or assembly of printed circuit boards.
2. Filter this list according to your (possibly weighted) criteria. This creates a supplier longlist that provides a good overview of the market.
3. Refine the supplier longlist using the requirements profile you have created and differentiated criteria to generate a shortlist of ten to 20 suppliers of components or assemblies.

4. Identify key suppliers.

On the basis of your shortlist, you can now identify key suppliers. The prerequisite for this, however, is the definition of your sourcing strategy, whereby you should always define this in coordination with your respective product group strategy. The number of suppliers you want to work with and the region in which your future partners operate will vary depending on the product group strategy.

Multisourcing has proven itself as a sourcing strategy: working with several suppliers, who may produce in different regions, firstly allows you to achieve lower prices and secondly avoids dependency on individual suppliers, which in turn reduces the risk of supply bottlenecks. But bear in mind that multisourcing usually involves higher costs in the procurement process.

To identify your key suppliers, you should proceed as follows:

1. Send all manufacturing service providers on the shortlist a non-disclosure agreement or NDA with a request for confirmation. Under no circumstances should you take any further steps until the NDA has been signed.
2. Gather initial information by starting the RFI process by sending out the necessary documents - including the specification of the component group to be awarded, the quality requirements and the terms and conditions - and obtaining the first indicative price offers.
3. Evaluate the incoming information by making the information and offers comparable according to delivery conditions or quantities, for example. Create an offer overview by weighting commercial and technical parameters that you have previously defined in the team. If any points remain open, you need to clarify them, for example by obtaining further information from the companies concerned.
4. Reduce your shortlist by selecting three to five providers from the bid overview with a view to your sourcing strategy and the weighting of individual commercial and technical parameters.

5. Nominate the final EMS suppliers.

You can now nominate the final EMS service providers from the group of key suppliers. To do this, you should try to understand their approaches or concepts in production and manufacturing as precisely as possible, but also get an impression of their competencies and actual production capacities. You can do this, for example, in the form of workshops that you conduct together with the key suppliers. Of course, on-site visits to the preferred production locations of the individual suppliers are also very useful.

On the basis of these insights, you can update your offer overview again and finally select the key suppliers with whom you want to enter into negotiations. The negotiations should be based on the current specification of the assemblies, of course taking into account any changes that may be necessary in the future.

At the end, you should ideally have a development contract, but at least a robust letter of intent.

6. Involve the nominated EMS suppliers.

The next step is to involve the final nominated EMS suppliers in your development process. This is a complex process that involves at least the following steps:

1. The first thing you need to do is define the responsibilities in the individual development steps. The basis should be a cooperation concept that sets out who has to do what and by when. You can do this as part of a kick-off meeting.
2. You then need to define the technical and commercial interfaces between you and the EMS providers: Define contact persons for technical and commercial matters on both the supplier and customer side. In this way, you can ensure prompt, targeted and loss-free communication.
3. Conduct audits at the production sites of the nominated EMS suppliers. Your quality assurance, development and purchasing departments should definitely be involved in this.
4. Introduce cost tracking that records all additional costs and investments incurred by the supplier in the individual product development phases. This creates transparency, not only in the pro-rata customer allocation to the component price, but also in the possible increase in required investment payments from EMS suppliers.
5. Establish regular coordination meetings in which you discuss current technical and commercial problems and issues with the manufacturing service providers at management level.
6. Finally, draw up a series supply contract, which above all sets out the key points on the customer side. The draft contract should therefore not come from the service provider, but from you.

7. Carry out an offer comparison for the key components.

As soon as you have a bill of materials of the materials and components required for the development, production and assembly of the PCBs, you can update the offer comparison that you created to select the key suppliers. To do this, compile the components that are key components according to the Pareto principle from your parts list and compare the prices quoted by the companies on your approved vendor list for these key components. You can then decide which components you want to buy from which EMS suppliers and which you want to purchase directly from the manufacturer as provided parts.

To further reduce costs, you should create a comprehensive cost break-down for the key components in order to increase cost transparency. This not only improves cost tracking, but also enables you to search for potential alternative suppliers for the key components. However, if you find more cost-effective alternatives, you must first consult with the development department. This department has the final say in this phase.

8. Conclude the series supply contract.

Once you have determined which offer is the most cost-effective based on the current parts list and the last design freeze, you can conclude the series supply contract. The most important thing here is to fix the target price and the price reduction stages over the following years on the basis of a quantity structure. It is also advisable to include clauses that regulate additional cost changes depending on various volume options. This can often save you discussions later on.