White Paper on how PLM can help EMS Industry sustain profitability by adopting better product management processes
Introduction
Introduction
Electronic Manufacturing Services (EMS) Industry took off in later part of twentieth century by providing value added services to electronics product companies. Their boom started with that outsourcing model, where EMS companies provide services in the entire spectrum of supply chain of electronic products. The business model of EMS companies ranges across product development collaboration, sourcing, procurement, inventory management, manufacturing, assembly, packaging and shipment. EMS companies provide value to the customers by taking care of the overheads of inventory, plants, resources that are needed to procure, store and manufacture and distribute. As the prices are falling down for the electronics products, lifecycle of the products becoming shorter, industry being more commoditized, market being volatile, new players emerging from growing economies survival and sustaining profitability is the key challenge that EMS companies face today. This paper addresses the key challenges around the business process of EMS industries and how Product Lifecycle Management (PLM) can help enable business transformation for the EMS Company.
Business Model
The various business model that EMS companies operate are consignment delivery, NPI (New Product Introduction) services, sourcing, manufacture and build and after market services. Based on the product and customers, EMS companies operate on one of the business model or take care of entire lifecycle from NPI to AMS (After Market Services). The bulk of the business though lies in the source, build and ship model.
Consignment Delivery: In this business model, the customer will provide the components and parts for the EMS Company. EMS Company just needs to assemble the product and ship it across. The customer will take care of the procurement, component pricing, and supply chain.
Key Challenge and Solution: The values add of the EMS Company in this model is they take care of assembly, inventory and packaging. The key challenge is to provide an effective and lean process to fulfill order in this consignment model. PLM can enable leaner process for product management. Also since the component and part information can be registered faster as we don’t need technical or sourcing details for this model.
NPI Services: In this business, the EMS companies collaborate with the customer and use their manufacturing lines to develop prototypes. The customer can leverage the product development and manufacturing expertise of the EMS companies in delivery the feasible product with optimal cost.
Key Challenge and Solution: Since the iterations of the new product development phase are frequent and many, EMS Company should have better build management process to manage product variants. PLM can enable build management through revision control and Lifecycle process for managing NPI releases. Also once the product matures and moves to production, the lifecycle process can be used to identify the product as production version. The key take away of PLM solution here is ensuring traceability of the product across its lifecycle.
Using PLM framework EMS companies have reduced product release cycle time by 10% and the able to reduce the cost by 15%.
Sourcing
Sourcing is not usually a separate service offered by EMS Company, but it is coupled with the other business model. But there are various operating models in sourcing as explained below.
EMS Sourced: In this model, the customer provides the specification for the components and parts, the EMS companies can identify the manufactures and the suppliers for the components. Here the demand and pricing needs to be managed by the EMS Company.
EMS Priced: In this model, the customer provides the approved manufacturers for the components. The EMS Company can source it from any supplier and fix the price. Here also the demand and the pricing information need to be worked and stored by the EMS Company.
Customer Authorized Quoting: Here the customer specifies the demand and the reference prize. Also the manufacturer and the supplier are fixed by the customer. The EMS Company can negotiate with the supplier and fix the price of the components.
Customer Sourced: Here the customer specifies the supplier and manufacturer. The EMS Company procures from the supplier based on customer contract. There is no overhead of demand management, sourcing or pricing management for the EMS Company.
Key Challenges and Solution: One of the key challenges in the product management for an EMS company in the component identification and its management in the ware house.
i) The reason is for the same component the approved manufacturer by the customers could be different. So the EMS Company provides different code for same components for different customer. The reason is at any point of time one of the customer can modify the AML (Approved Manufacturer List) of the component and this calls for component recoding at later point.
ii) Another reason is the potential violation of demand forecast of one customer may affect the inventory of other customer. To eat away inventory of one customer by another, components are recoded for different customers and stored at different locations in warehouse.
iii) The third aspect that components are recoded is the sourcing model of the customers will wary and hence the price of the components will vary. Though PLM can identify and manage the price information with respect to the customers and suppliers, its comes complex in the downstream process like ERP and other systems.
PLM can also provide mechanism to identify components based on functional and technical characteristics, though they are tagged under different codes for sourcing and other reasons. So when there are changes in the products and components, the related components can be identified and integrated change management is possible, which is an important aspect in product management.
Product Structure Management:
Since there is a huge pressure to deliver new products faster, the cycle time to register and release products has to be very low for EMS business. Product structure management becomes crucial as they have to relate and track, customer parts, manufacturer parts with the internal parts. The customer provides the product structure (BOM – Bill of Material) with the approved manufacturer list for each of the components. The EMS Company then has to identify the manufacturer and customer parts and relate them with their part in the product structure.
The component data dictionary for the manufacturer part number and the manufacturer needs to be maintained for each customer, since the manufacturer part number (MPN) notation can vary between customers for the same component. Based on the sourcing model and for each customer a unique IPN (Internal part number) will be registered. So in the EMS company the IPNs serve as stock unit of the part, where it holds the right AMLs(Approved Manufacturer List) specific to each customer.
Managing Product Changes:
The product changes, improvements and enhancements are quite frequent and common in electronics industry. Ability to quickly absorb, adapt and fulfill the change is a key differentiator for a successful EMS company. To carry out any change, the impact of the change should be evaluated well before executing it. The change management process of the EMS Company should have the rigorous evaluation phase; will carries out the impact due to stock at various levels, the stock dispositions details, the manufacturing alterations, and the cost impact due to all. Based on the information, the EMS Company can help the customer to evaluate, prioritize and carry out the change.
Product Ramp Down:
Reuse of parts is one of key drivers, which will optimize the components use and could prove very important when products are ramp down or technology becomes obsolete.
EMS companies should have a better process for product ramp down and ability to track component ramp down based on the product ramp down. Whenever product is ramp down completely or partially in particular site, the exclusive components specific to the product should be tracked. PLM system can be used to report the site specific and enterprise wide components that need to be ramped down when product is closed or ramped down.
Stock disposition plays a important aspect in the ramp down or product change process where the cost impact of the change needs to identified well in advance; the disposition could be of customer buy back, supplier buy back or external party buy back, if not scrapped.
Environmental compliance on products and disposition is a key factor and PLM solutions can be leveraged to manage compliance process and data. It is estimated that using better change management and better reuse of components by using PLM, some of the EMS companies have reduced change impact cost / scrap cost by 15%.
Confidential Data Management:
EMS companies will do manufacturing and assemblies for customers who are competitors. Hence the data and documents need to be maintained confidential across the product lines of the company. PLM based on this organization data structure and security layer, provides granular security across the data layer.
The data can be restricted within a site (plant), within a product line (Manufacturing Unit) specific to a customer and specific to NPI Line. A typical data security filter that is needed in EMS Company is shown below.
After Market Services
The After Market Services (AMS) of product is one of the offerings of EMS Company. The ability to manage the service kit Bill of Materials, ability to trace Repair BOM and components are the key elements of this process. Here traceability of the components as production or repair and traceability towards a particular product are the key characteristics that PLM system should manage. Being managed products and components as lifecycle stages and enabling process will ensure right traceability and better product governance. Conclusion
As the product data management becomes complex, right product management process using PLM solution can be a key differentiator for the EMS Companies in delivering products and services faster using leaner processes and better governance. PLM system with its tight process compliance framework has a distinct advantage in addressing the above challenges over the other enterprise applications. Its core features of layered data security support towards IP data management and product lifecycle governance enables EMS companies in reducing the product release cycle time and save cost.
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