Finding low-cost global suppliers
By Purchasing Staff -- Purchasing, 3/31/2005 2:15:00 PM
Many electronics manufacturing services (EMS) providers have transitioned manufacturing to China and other Asian countries to reduce labor costs. However, EMS companies are also able to reduce material cost by purchasing in those same areas. It’s not uncommon for parts to sell for 20% less in China than in North America.
As more manufacturing migrates to low-cost Asian countries, the challenge for many EMS providers will be to find low-cost suppliers in those regions, says Dan Shea, chief technology officer of EMS provider Celestica, which has extensive manufacturing operations in China and has developed a low-cost supply base there. However, Vietnam and Romania are emerging as the next geographies where manufacturing will migrate and Celestica will have to develop a capable, low-cost supply base there as well. Shea says those supplier development efforts will focus on total cost of ownership. One way the EMS provider will try to lower TCO with suppliers is through greater use of information technology and component data bases. "We get component data including end life data, forward pricing index information or data about the Restriction on the Use of Hazardous Substances (RoHS)," says John Boucher, chief procurement officer at Celestica. RoHS bans the use of lead in electronics equipment sold in Europe beginning in 2006. Such data can help Celestica make better strategic decisions about components and suppliers. For instance, there may be a component that is inexpensive, but if it is not RoHS compliant, it could result in a system not being able to be sold Europe. Shea says larger companies have been first to outsource to low-cost Asia countries and expect lower cost on materials. Now smaller companies are getting into the act and are beginning to want their products manufactured in low cost areas, expecting the same cost savings for materials.
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