June 9, 2020:
In my last post, I discussed why it’s a mistake to invest all your PCB spending in one vendor. Unless directed to use one vendor by a customer, there is no reason not to always be shopping your current board business. It keeps present vendors on their toes. The business should always be fair game for pricing review.
In this post, I want to expand on that point and explain why, as a PCB buyer, you could be putting your existing customer relationships at risk by getting too comfortable with only one board manufacturer.
And I’ll give you tips on how to quickly and effectively evaluate potential vendors.
Remaining competitive is not only important for new business opportunities, but also for keeping present business from slipping away. I am sure your customers–like you with your suppliers–sometimes wonder if they’re getting the best value for their assembled product.
The PCB makes up eight to 12 percent of the bill of material 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, dependent on conditions at a particular manufacturing site at a particular time.
That’s why PCB buyers should regularly seek offerings from other vendors, especially on business that is 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.
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 just 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 then 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, and 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.
As Henry Ford said, “Competition is the keen cutting edge of business, always shaving away at costs.”
That applies to PCB vendor pricing as well. It’s crucial to 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.
Want some help managing your vendor base? I can do that! Reach out to me at email@example.com.