Getting a good deal is part of human nature, but it pays to be wary if your electronics manufacturing services (EMS) supplier promises what seems like a "too good to be true" price.
Suppliers willing to go to extraordinary lengths to win your business - including reducing their pricing - risk putting the success of your venture on the line.
This is because the compromises they may need to make to get you what you want for the amount they have quoted could have a drastic effect on production quality, consistency and delivery.
More worryingly, it may be you - the original equipment manufacturer (OEM) - that ends up paying the price.
There are many key areas in manufacturing that could be affected as a result of EMS suppliers undercharging for their services. Here are four of them - plus the warning signs to look out for - as well as some insights into what you can do to avoid the common pitfalls of buying on price alone.
Quality in manufacturing is a big issue. Compromise it and you threaten the viability and profitability of your venture through increased product recalls, returns and customer complaints.
Is your potential supplier forsaking quality as a means of providing you with a low price? To put your mind at rest make sure they can demonstrate a robust approach to planning, controlling, assuring and improving quality standards across their operation and your production.
Is there evidence that your EMS supplier has their finger on the pulse when it comes to technological and other developments?
Partnering with a supplier that only focuses on the "here and now" means they may not be continually investing in their business and thereby not capitalising on the opportunities of tomorrow, resulting in your company losing out.
If you have a long term plan in mind for your partnership, then it's sensible to seek a supplier that shares that vision. Even better is to look for a pioneering supplier that is keen to embrace and invest in new technologies, so that you can continue to develop together.
3. Added value
It's wise to exercise a healthy dose of caution if a supplier talks only of price at the expense of the "value-added" services they could offer. It could be a sign that they are somewhat one-dimensional and, therefore, unlikely to have what it takes to evolve and adapt to your specific needs.
Instead, look for a supplier that is likely to make a profitable impact on your business over the long term by providing lucrative, time saving services, such as "through-life" product support, component management and logistics.
Employees are a company's biggest asset. Nonetheless, there are still suppliers out there who are willing to cut corners when it comes to their workforce so they can lower their prices.
The fall out of this is that the expertise you receive from your EMS supplier is severely compromised. They may be unable to find innovative ways of reducing risk, optimising production, selecting the right components and getting you the return you desire. This type of specialist insight can really make a difference to your business and it's best to make sure any future suppliers invest sufficiently in ongoing staff skills training and personal development.
As the relationship with your EMS partner develops, their staff stability becomes very important. It’s far from uncommon for their staff to know as much, or more, about your products than you or your staff do. But this takes time and it clearly won’t occur if staff turnover at the EMS company is high.
Avoid a good thing turning bad
A preoccupation with price can seem on the surface to make good economical sense. Yet this is not necessarily the case.
There is always a point when prices become so low that something good has to give. In manufacturing, quality, value, investment and expertise are all put on the line.
Furthermore, if more and more business is awarded to a supplier because of their low prices, other EMS firms may be forced to comply. This can have a devastating effect on companies and customers right the way through the supply chain as standards fall.
Re-focus and prosper
Focusing on the expertise and services your EMS partner can offer is a way of ensuring long term prosperity for you, your supplier and the broader manufacturing industry.
The price you see on a supplier's invoice is only part of the real acquisition cost. The true bottom line impact on your business takes more analysis and time to fully understand. However, to re-focus on this, rather than the visible cost, can yield results that are illuminating and surprising.
So, if you do receive a quote from a supplier that seems unbelievably competitive do some homework first to avoid being tempted into a good deal that could ultimately turn out for the worst.