Being ready to pivot offers flexibility and keeps vendors honest.
What is your company’s PCB buying strategy as we emerge from the confines of the Covid-19 pandemic shutdown? Do you have one?
Those responsible for corporate procurement need to understand supplier diversification is the key to remaining competitive in this challenging economy. Yet, many OEMs and EMS companies have invested too much of their annual PCB spend with only one vendor. That could prove to be a costly mistake.
I understand and appreciate vendor loyalty, but are you leveraging your vendor, or are you being leveraged by your vendor?
The truth is companies that stick with this one-vendor approach will have a harder time remaining competitive in the post-pandemic world. “We have used this vendor for years” is not a viable strategy.
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It’s not an excuse to say buyers are overwhelmed with too many other responsibilities. Keeping the vendor base on its toes is a core buyer responsibility. It’s the job of upper management to ensure buyers are always working to bring prices down, for both new opportunities and existing business.
The PCB makes up eight to 12% of the bill of materials and requires over 100 different processes to manufacture. The pricing for this custom-made item can vary greatly, depending on technology required, as well as the volume and delivery schedule. But it’s also subjective, tied to conditions at a particular manufacturing site at a particular time.
That’s why PCB buyers should regularly seek offers from other vendors, especially on business already in-house somewhere else. Things change, and buyers should be ready to pivot to less expensive solutions, even for customers who only want to consider domestic suppliers.
Make sure you can offer a list of vetted suppliers, whether they are offshore or domestic. Your customers need to know you’re always seeking the best pricing for them.
I understand we are all busy these days and that adding a new vendor to the approved vendor list (AVL) can be time-consuming. Many EMS and OEM companies make the process of moving PCB orders to new vendors too cumbersome. They are hurting themselves.
And the truth is adding qualified suppliers is not as hard as you may think. Here’s a summary of how to evaluate a potential vendor:
Get a trial quote. On the buying side, it’s all about the price. There’s no need to get the quality or production departments involved if the only reason to move a board is for better pricing. Start with a trial quote after you have an NDA in place with a potential vendor.
Check references. If the trial quote looks good enough to justify moving an order, proceed to the reference checks. Ask for at least three references, preferably in the same industry. And make sure you actually call those references.
Money matters. If the references are good, it’s time to check the vendor’s financial stability. Run a D&B report. Call the vendor’s bank and suppliers. Make sure they pay their bills. Getting financials from an offshore vendor can be difficult, so in that case, double-up on references instead, and hit harder on questions concerning timely communication and customer service.
Quality concerns. If pricing, financials and references look right, it’s time to get quality involved. Make sure your prospective vendor has all the required credentials, such as UL, ISO, and anything specific to your customer’s needs. Send out a vendor survey (you have one of those, right?) and create a vendor file.
Talk to production. Production departments are usually averse to change, understandably so. Don’t cut your new vendor into the production schedule without involving your production people in the approval process. To help put production at ease, you can issue a contingency purchase order to the vendor (with tooling and test charges waived), with little risk to your company.
Henry Ford said, “Competition is the keen cutting edge of business, always shaving away at costs.” That applies to PCB vendor pricing as well. Keep your vendor base on its toes because that lowers costs. You can do that with minimal risk to your manufacturing operation. And that will keep your customers happy.
Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of Better Board Buying; firstname.lastname@example.org.