Review pricing with current and outside suppliers to confirm you are paying the going rate.
“We don’t have the bandwidth to move business.”
That's what a printed circuit board buyer told me recently.
Let’s unpack that because it could be a shortsighted attitude.
When an EMS firm puts a PCB supplier on its AVL, it often asks only for pricing on new projects. When it comes to existing work, the response is often, “We don’t move boards once they are placed,” or, “we don’t have time to rebid those,” or, “it takes too much effort to move to another vendor.”
Even in the face of rising board costs, many buyers and procurement managers resist moving production away from suppliers they’ve used for years.
What about your company? Do the people responsible for overseeing your supply chain and ensuring the most cost-effective operation make buying decisions based on lack of “bandwidth?”
If so, it’s business malpractice.
Because when that is the prevailing mindset, the PCB supplier is aware of it. They know your board buyer doesn’t want to upset the apple cart, and they will take advantage of that. OEM and EMS companies that invest too much of their annual PCB spend with only one vendor are making a costly mistake.
I understand a buyer’s concern for good quality and consistent delivery, but you can get that from more than one fabricator. And then it comes down to price. Complacency will cost you money. When EMS firms focus only on winning new business, they are putting their existing business at risk.
Many EMS companies are not being proactive to protect their existing assembly business from jumping to a competitor, especially when it comes to the cost of the bare board. Although the common wisdom is, once won, assembly programs will stay in place, in fact, over the last year several OEMs have asked me to suggest new homes for their assembly work. OEMs are taking a hard look at their assembly costs to remain competitive and maintain profit margins. PCB materials, metals and freight pricing are skyrocketing. It is good business to look at reducing costs wherever possible, especially on existing orders. It can be done successfully without sacrificing quality.
And it’s not an excuse to say board buyers are overwhelmed with responsibilities. Keeping the vendor base on its toes is a core responsibility. More important, it’s the job of upper management to ensure board buyers regularly seek offers from other vendors to compare with the prices they’re getting.
Business doesn’t always have to be moved to get better pricing, however. The PCB is usually eight to 12% of the BoM, and any savings found can either add to your bottom line or be passed on to the OEM customer, making it less tempting for them to move business away from your company.
As a custom-made item, the printed circuit board’s price is somewhat subjective, depending on technology required, volume needed, speed of delivery and location of manufacture.
PCB buyers should always review pricing with present suppliers and go outside the company AVL to confirm what they’ve been paying is in line with the going rate, especially on jobs that have been with the same vendor for a long time. With good industry knowledge, they’ll be able to negotiate intelligently. EMS management should encourage buyers to make time to actively quote other qualified sources.
Are your board buyers leveraging their annual PCB spend, or are they being leveraged by a current vendor?
It is not hard to explore the PCB market. For additional PCB supplier leads, buyers need to attend industry trade shows, read trade magazines, search LinkedIn or ask their favorite component rep about good suppliers.
Once that information is accumulated, get an NDA and ask for several quotes. If the quotes are competitive, ask for and follow up on references. If all looks well, then get your quality and production departments involved by following your corporate procedure for a new vendor addition.
At the same time, let your existing vendor base know you are looking elsewhere, even if the reason only has to do with price and not performance. At a minimum, this exercise will keep your vendors on their toes when it comes to price, delivery and quality.
Supplier diversification is vital to your success.
Don’t get complacent with your PCB purchasing practice. You may regret it.