EE Technologies: Advice on Purchasing Electronic Components
May 02, 2012
Electronics manufacturing service providers in Mexico and the U.S., earn their contracts based upon the quality of the manufactured end product that they deliver to their customers. If a project starts on the wrong foot, this will be reflected in the quality of the end product.
The beginning of the process for turn-key manufacturing electronics manufacturing services companies like EE Technologies is to procure parts based on customer documentation including bills of material. Do this right, or the next contract will go to the company who can do so consistently.
Selecting the right electronics parts is a combination of science and art (2 parts science and 1 part art). EE Technologies understands this and utilizes both to get its projects in Mexico and in the United States off the ground on the right foot. The science part includes qualifying suppliers and executing on solid procurement policies and processes. The art part is a function of buyer talent. As an experienced team in both the United States and Mexico, EE Technologies is rock solid and continually assessing and making improvements.
Selecting the right electronic parts in the U.S. and Mexico begins with selecting the right vendors. Vendor relationships are critical to an Electronics Manufacturing Service Provider’s success. Key suppliers are selected based on their ability to provide quality product and meet established delivery schedules. Potential suppliers must be qualified to meet EE Technologies’ and its customer standards.
To begin, EE Technologies requests that the supplier complete a self audit – to see if minimum requirements are met – confirming solid process controls exist and issues are documented and corrected. Based on the self audit, EE Technologies may schedule a site visit to observe the supplier’s facilities, equipment and quality system. Based on the results a qualifying purchase order will be given to the supplier. Once received and inspected, there will be evidence of the supplier’s outputs to evaluate. Each successive step gets the supplier closer to the goal of becoming a qualified supplier. Even after the initial qualifying order, the supplier must meet incoming inspection requirements established for all suppliers. These documented requirements are determined by the type of component or product, supplier quality history, and the value of the product to the EMS provider.
For electronic components the qualification process is much simpler than for fabricated parts. For components, distributors with proven track records of quality and controls are utilized. For some hard to find components, smaller distributors are utilized. In both cases, there is considerable evidence of good performance and inspection requirements are established with consideration to historic performance. Some supplier parts can even qualify for EE Technologies’ Dock to Stock program – bypassing inspection and being placed directly into inventory. This program criterion is well documented and managed to ensure quality parts make it to the production line.
Fabricated parts warrant more qualification attention and the inspection trigger can be from strategic priorities or customer request, or be end product specific. Sometimes the trigger for qualifying a new supplier comes from the EMS provider’s customer. Customer approved vendor lists may specify the supplier to use. This will generally expedite the process since the customer’s approval signifies qualification. EE Technologies may still request the self audit and follow its processes to completion in order to utilize the supplier for other products or projects. And incoming inspection requirements will always apply. Customers will use specific suppliers at times because those suppliers were qualified during the prototype and design phases of the manufacturing process. In some instances, there are significant investments made to tool a product – examples include plastics and metal fabricated parts. These formed fabricated parts require expensive die casts be made to manufacture the individual pieces. Because of the large expense, these die casts are often made in China and then can be shipped to a domestic location where ongoing production will occur.
If the customer has defined a supplier on its Approved Vendor List (AVL), EE Technologies honors the AVL and will only make a supplier recommendation and/or change with customer approval. However, when there is not a required supplier on the AVL or when there are several, EE Technologies has some latitude to choose the supplier with the best service and price. And of course, this freedom also allows for further sourcing options.
Regardless of the trigger for qualification, EE Technologies always honors the certifications and part specifications listed on the AVL. Suppliers who do not meet the requirements are not considered regardless of the price. Recommendations for consideration of new suppliers will be considered by the customer. The final determination will be the overall cost related to making a supplier change. Overall cost is a function of at least two factors – money to transfer to new supplier and time to get product produced.
Choosing a supplier takes time and maintaining good supplier relationships is also a commitment of time and attention. Regular ongoing communication happens informally as parts are sourced and ordered and delivered. Communication with key suppliers occurs formally with monthly and quarterly reports of on-time delivery and quality performance as well as other measures. Suppliers performing under expectations are notified of the issues and required to respond in writing with corrective action plans.
Supplier qualification and other procurement policies are documented in EE Technologies’ ISO/TS 16949:2009 system. Other ISO certified companies also have documented policies and are independently audited as confirmation. Due diligence is highly recommended when choosing non-ISO companies in countries known for counterfeit parts with no aggressive crackdown on irresponsible counterfeiters.
Procurement Policies & Processes
After qualifying suppliers, the ongoing process of procuring happens. Developing solid policies and processes for procuring parts ensures that the daily activities are effective and value added to the organization. EE Technologies continually improves upon the initial policies developed and documented in the quality system. The exact steps a company establishes are less important than the consistent execution by all involved in the process. To ensure greater consistency, EE Technologies uses technology to source product, to execute buys and to follow up to ensure performance.
Some of the ways technology helps with sourcing product faster include quick cross reference guides and various tools offered by most major component suppliers. These are leading electronic component databases offering tools for cross references, BOM management, obsolescence forecasting & inventory tracking. Two that EE Technologies uses are www.siliconexpert.com and www.findchips.com. These tools provide information for the buyer to make decisions more quickly and easily. And orders placed timely keep the procurement cycle shorter which is good for production schedules and customer deliveries. These tools also help with cross referencing when there are parts shortages or obsolescence issues. Of course, parts are only procured from approved suppliers and cross parts are only used when approved by the customer. Often bills of materials allow for this flexibility because there is no negative impact on the product design or function.
Technology can also aid buyers in executing buys. Package supplier management systems (standalone or in enterprise resource planning systems) are available to make purchasing transactions easier. Customized systems are even better. EE Technologies uses a customized system for efficiently and effectively executing the purchasing transactions. The system identifies buy needs and gives the buyer all of the information needed to make a good buy decision. Tracking and follow up with open orders is easier too. Also, policies (like minimizing excess inventory, vendor managed inventory policies, landed cost quoting, and timely order confirmation requirements) are more consistently followed based on established controls within the system. Online approvals based on policy requirements can be completed quickly. Exceptions are tracked. All information is available to the buyer with the click of a button (or two). Taking advantage of technology and building it in to process helps EE Technologies to meet material requirement dates to support planning, production, and ultimately customer delivery.
Recently the customized supply chain system has been improved to have supplier portal functionality – decreasing time between the buy need and the order being placed with the supplier. Suppliers can also see the impact of pushing delivery dates out which affects their supplier rating. Buyers can document data related to push outs since no two push outs are the same. The buyer decides whether to accept the push out because there is no other source, or to keep pushing and expediting, or to affect delivery and impose a fee to the supplier.
Quality and delivery performance measurements are tracked and monitored. Suppliers who do not meet EE Technologies performance standards do not maintain the status of qualified supplier and will not receive additional business from EE Technologies.
Having good suppliers and great technology are valuable pieces in the process of selecting the right parts. But the most important aspect is buyer talent. The right buyer makes the other two pieces work together to produce results – the right part at the right price at the right time. People can be trained on processes specific to a company, but not everyone can be trained to be a buyer. Skills like negotiating, communicating, and organizing are required. And not all people are wired to handle these activities. People with the drive and commitment to learn can get better but hiring the right person is essential. Hiring someone who does not like to interact with people or is a people pleaser as a buyer would be a mistake. So before you hire, develop a profile (job description and requirements) for the individual skills and talents you desire. And then recruit with this profile in mind.
Often there are opportunities to hire and develop someone to be a junior buyer. In these instances, the recruiting profile would include willingness to learn and to gain understanding about technical aspects of being a buyer for an electronics company. The abilities to accept new roles and responsibilities and to grasp and share ideas would also be important. Other important qualities include communicating clearly when something is not understood or seems wrong, creating rapport with suppliers, and having a good grasp of mathematics. Junior buyers are then developed to be seasoned buyers with additional responsibilities.
And sometimes a seasoned or senior buyer is needed to fill a gap in the organization. Senior buyers understand negotiation and standard purchasing practices. Generally, senior buyers are certified by the American Production & Inventory Control Society (APICS) or American Purchasing Society (APS). Although not required, certifications are preferred. Certified Purchasing Professional (CPP) candidates and Certified Production & Inventory Management (CPIM) candidates demonstrate that they have knowledge required to obtain the certification. Certified or not, senior buyers have a strong desire to solve problems, to be efficient, to act with a high level of integrity and honesty, to be firm but fair, to have realistic expectations, and to continually be looking for better pricing via alternate sources or with an existing supplier.
Recruiting the right team is a key step at EE Technologies. Once hired, a cycle of training and setting expectations begins. Often the leader of the purchasing organization will also be a Certified Purchasing Manager (CPM). The purchasing leader knows the right mix of junior and senior buyers and is able to develop the team and systems to achieve the objectives of selecting the right parts.
Selecting the right parts is a combination of science and art and finding the right mix of science and art is an art in and of itself. With years of experience, EE Technologies is making this happen. The best indicator is the fact that word of mouth advertising is the primary source of EE Technologies’ new customers. Selecting the right parts gets projects done right and on time!
EE Technologies, Inc.