Month: April 2019

The importance of vendor scorecards

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Large OEMs, especially those who’ve grown through acquisition, will have thousands of suppliers, and at some point they will conclude that it’s time to streamline and focus on more strategic partnerships. Suppliers are usually awarded on a best-performing basis, so how do you compare?

Within an organisation there may be many different supplier stakeholders, and these people will have different views and opinions based on their interactions with different departments. Sometimes a decision is made based on intangibles such as a clash of personalities, old or second-hand information, incorrect data, or recent issues that are skewing longer-term performance; bad data entry, inflexibility, or issues where the supplier was not the root cause can also affect decisions. In these situations, vendor scorecards provide not only a way to objectively set and monitor performance but a way to work through issues and strengthen relationships.

Builds more predictable supply-chains

Scorecards provide a way to predict and eliminate risk. Ideally, a supplier should be made aware that their performance will be monitored and measured throughout the term of the contract so there are no surprises when a decision is made. Metrics are based on consistent and regularly scheduled audits or evaluations that are agreed to by both sides. This awareness between both parties are typically part of the contract negotiation phase. With performance data in hand, supply-chain managers can make data-based decisions regarding where to direct spend.

Provides an intuitive, easy to understand dashboard

Vendor scorecards should show data in a consistent and centralised manner, making it easy to make side-by-side reviews. Having an intuitive, easy to understand layout is critically important, otherwise nobody will use it – which defeats the purpose of having a scorecard

Helps build long-term partnerships

Scorecards have limited value taken in isolation: trends are more valuable over longer periods. Harnessing the long-term benefits is actually what makes them a very powerful tool for building, engaged collaborative partnerships. As one of the UK’s top 10 EMS companies, Chemigraphic takes vendor scorecards seriously. We regularly discuss metrics and data with our customers and our performance against an agreed set of KPIs. Through these KPIs we get to understand what’s really important to their organisation. The gains are numerous: formation of common goals, continuous improvement, contractual reviews based on past performance, more targeted and frequent communication, and ultimately the most important of all – greater trust.

Helps define what’s acceptable, what’s not

Typical scorecard measurements include on-time delivery, quality, yield, returns, warranty and communications, along with customer-specific requests. Working through the details of these metrics is very useful, as this will help to determine what’s acceptable or isn’t. On-time delivery, for instance, often leads to differences of opinion. Some OEMs will take a very strict view and penalise for any deviation – no later, but also no earlier. Is there a window of acceptability?

Empirically quantifying performance can have benefits in itself by making poor performance highly visible, but the true value of scorecards comes from cooperation to implement corrective actions. Within EMS suppliers, the performance may not be measurable purely based on internal capabilities; it’s very often subjective at the product level. For example, what’s an acceptable cosmetic appearance? No assembly is 100% visually perfect. A glaring defect in a highly visible surface should be blatant to everyone, but what about a small underside scratch or a minute speckle in a painted finish. Where is the dividing line between what acceptable and not? This is where it can be useful, or even a necessity, to have clearly documented and agreed acceptability criteria.

An EMS does not own a product design, and their extent of liability is “to the defined customer specification”, however, there can be grey areas and one of the most common is a cosmetic standard. For instance, in a plastics moulding process, there will be some visual features and acceptability may be entirely subjective. A small blemish may derive from the core process and is not necessarily a “fault”. Subjective elements can be difficult to quantify outright, but it is possible to define things like surface blemishes by size, type and location. There may be a need to extend this to viewing angles, inspection lighting conditions, viewing distance and levels of magnification. The important point is that there is a definition and agreement of what is and is not acceptable, and this may require adjustment if a selected process or material is simply not able to consistently deliver that output or within a realistic budget.

Points to other factors

Certain data may require further investigation. For example, supplier returns can be a good indicator of supplier performance, but were 100% of the returns valid? Were there defects or issues where the supplier could not be realistically held accountable? Within the complex and fast-paced transactions of a modern manufacturing environment, materials can be ‘put aside’ for a variety of reasons. Over time the pile can accumulate. When someone then eventually addresses this ‘bone-pile’, the original reasons for segregations may be lost and it can be tempting to return to supplier, causing a returns spike.

The effectiveness of a vendor scorecard regime depends on the attitudes and style of the relationship. Ideally, a supplier should commit to a process without getting defensive or obstructive and correspondingly the customer should be able to ensure those metrics captured are fair and accurate and concede when liability is closer to home.

How can your EMS contribute to product design?

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There’s a notion that Electronics Manufacturing Services (EMS) companies are only there to build sub-assemblies to order, test, distribute and sometimes provide return/repair services.

This is not true!

The prevailing myth is that when an OEM (Original Equipment Manufacturer) wants to outsource actual product design, they need to consult an ODM – an Original Design Manufacturing provider – who is likely to offer them a reboot of something they’re already making for another company.

Many experienced EMS companies (we prefer the term ‘manufacturing partner’) can provide equally skilled services at the front-end of the value chain, both designing the product as well as assembling, testing and volume production. In fact there’s a number of ways a manufacturing partner can make valuable contributions to product design.

Retain full control of your Intellectual Property (IP)

ODMs are companies that design and manufacture products for other companies to rebrand and sell as their own. In the typical ODM model, both the control of product design and the associated intellectual property shifts to the suppliers, although it does depend on the OEM’s size.

While ODMs have been scaling up in recent years, the trade-off to manufacturers buying ODM services is a significant loss of IP. Variations of PCB design, control boards and interface design have proven to be notoriously difficult and expensive to protect. For this reason, the business presumption is that an ODM will eventually become the OEM’s competitor, whereas an EMS partner works on behalf of an OEM as a service provider and not a competitor.

In a market dominated by OEMs that are rebadging standardised products which have been manufactured according to the same design, it becomes more difficult to differentiate your product from a competitor’s.

Benefit from broader EMS capabilities

A mid-size OEM might introduce 10 or 20 prototype designs in a year, or even fewer, whereas an EMS partner, set up to deliver volume and efficiency, will produce several hundred in the same time period. When EMS providers engage with customers early in the design process, they can apply their combined years of industry expertise and innovation to ensure the end result is as effective and efficient as possible. For example, we have accomplished engineering staff aligned to all aspects of design from pure PCB design and assembly to mechatronics, software engineering, COTS (commercial off-the-shelf) module integration, interface design, electrical design, enclosures, prototyping, testing and certifications or any task that brings life to a product.

Align component selection to Design for Manufacturing (DfM) principles

A customer may present us with schematics for a product design that aren’t feasible or could be improved. A problem we increasingly encounter is when hard-to-source MLCCs (Multi-Layer Ceramic Capacitors) are specified instead of more readily available polymer alternatives. It could be they’ve designed-in an EOL (End of Life) component or they’re proposing a needlessly complex PCB layout.

Early engagement allows for product optimisation using DfM principles. This is the practice of designing products with the manufacturing process in mind, choosing the best processes, materials and components. For example, we look at ways to minimise the use of new ‘active parts’ in favour of standardised, widely available components, as the design of a new part is usually only the best option from a purely inventive design point of view. DfM addresses this by asking designers to consider not what could be created, but what should be created. Minimising active parts through standardisation simplifies product design and leads to operational efficiencies through lower inventories.

DfM is not about discouraging creativity and new solutions; sometimes it is necessary to develop a new part. However, this approach ensures manufacturing costs stay low without cutting corners and the best results are achieved without compromising on quality or performance.

Help with front-loading the manufacturing process

Once a design is released to production, and especially after it has been validated for regulatory compliance, the costs of changing the design may be prohibitive. In fact, decisions made during the design phase determine 70% of the product’s final cost. There is often a singular, and closing, window of DfM opportunity that must be grasped to avoid later complications. Working closely with contract manufacturers while designs are still fluid ensures that both manufacturing and supply chain considerations are factored into your manufacturing plans.

By front-loading the process, an early review of all the commercial aspects of the design can be conducted, including but not limited to:

  • Design resilience and compliance aspects
  • Product and process design that balances product quality against design effort
  • The effort involved to design new active parts and costs of inventories
  • Use of alternatives for volume-friendly production
  • Use of standard parts, COTS modules, etc
  • Global sourcing and associated obsolescence issues
  • Selection of “machine friendly” packaging formats

Let’s take a look at some of these in more detail.

Designing to save cost on material spend

Component cost is a significant factor of DfM. Material spend makes a big difference to OEM profit, especially during uncertain times of fluctuating supply and currencies. By consolidating OEM material spending, an EMS provider will gain a 10-100 fold increase in spending power, providing direct access to global manufacturing channels and cutting out the proverbial ‘middle man’. This is how we can overcome minimum order quantity (MOQ) restrictions and access the very best price breaks. Also, a larger EMS material spending power means that components can be sourced in machine-friendly formats which increase automation and traceability, further enhancing product integrity and overall performance.

Factoring-in supply-chain considerations

Component availability and obsolescence issues are increasingly a problem for product design. We are well positioned to help a customer navigate through these issues. Even the most perfectly designed electronics assembly, presenting zero fabrication, regulatory or inspection issues can create critical delays and costly substitutions if components are not sustainably available.

These supply chain breaks may be due to:

  • Changes in distribution
  • Components being placed on EOL
  • Stocks being allocated as they run low
  • Or mergers and acquisitions creating ever-widening ripples

Product design engineers are often focused on component selection to achieve the desired functional performance and sometimes struggle to see beyond the immediate prototype or small-batch production stages.

We provide valuable input to help create selections that are sustainable and cost-effective, addressing future requirements when the product ramps into eventual production volumes or off-shore manufacturing locations.

Scores on the EMS doors: how real-time data dashboards drive service levels and operational efficiencies

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If you can’t measure it, you can’t improve it.
Peter Drucker, Management Consultant

The most successful EMS operations are those which combine the mass delivery and rigidity of automation with the intelligence and flexibility of those programming the machines.
Stewart Gadd, Technical Director, Chemigraphic

Not all perfect storms are a bad thing.

In electronic manufacturing today there is a cluster of trends coalescing to offer us unprecedented levels of information and intelligence about fluctuations in every aspect of our increasingly complex business.

This perfect storm is delivering instant insight into:

  • Our supply chain
  • The traceability of components through – and beyond – our production operations
  • The efficiencies of our manufacturing process
  • Ways to reduce error, ensure consistency and increase yield

It is being whipped up by a number of related trends:

  • The Internet of Things’ (IoT) offers us increasingly integrated data across all of our tech
  • Cloud computing delivers the capacity to store and analyse large amounts of this data
  • Automation delivers time-savings and efficiencies in both completing and reporting on tasks
  • Barcoding and scanning technology allows us to accurately monitor and trace components and activities at a granular level

At the very eye of this storm, however, lies the ability to act on all this available data and intelligence as quickly as it is being produced.

Without this ability to quickly reach informed decisions, electronic manufacturers will not be riding the waves to optimal efficiency but instead, drowning under a deluge of data.

And it is the use of data-driven dashboards that is the differentiator between sinking and swimming.

From information to intelligence

John Greenough, senior research analyst at Business Insider (BI) Intelligence, estimates that the number of IoT devices used by manufacturers will have exceeded one billion by 2020, with annual investments scaling up to $70 billion.

IoT investment

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Manufacturers, more than any other sector, are leading the adoption of IoT. There are sound commercial reasons for this: according to a TATA Consultancy Survey, manufacturers have seen a higher return on investment from the IoT than any other industry.

Chemigraphic have long used IoT solutions to track assets in our factories, consolidate our control rooms, monitor performance, reduce errors, optimise efficiencies and increase our analytics functionality through predictive maintenance.

But as more data becomes available across our entire manufacturing operation, the key to realising further efficiencies and quality improvements lies in how – and how quickly – we act upon all this business intelligence.

It is critical that this advanced intelligence is being viewed and acted upon in real-time: we must have an at-a-glance way to assess the sheer complexity of production and supply chain factors that affect our yields and reliability.

To do this we need to have access to data that has been configured to address customers’ specific requirements. And we need to intuitively grasp high-level information about what is happening on the shop floor – and to be able to easily drilldown into each stage of the manufacturing process if required.

  • We need the granularity to trace a batch of components, monitor a machine or review a technician’s progress
  • We need the overview to schedule tasks and switch job runs
  • And we need automatically generated (machine) intelligence reports that are distributed appropriately to highlight any variances or optimisation potentials that arise

Dashboards

Real-time data-driven dashboards at Chemigraphic

At Chemigraphic, we know the difference such real-time data-driven dashboards make.

Dashboards are displayed across our company, in every department from factory operations to sales, purchasing and procurement.

  • They are colour-coded, user-friendly and instantly readable, making it easy to identify and react to issues as they arise in real-time
  • They are an enhancement of our automated processes, helping link together our data collection, barcoding and traceability. All job numbers are barcoded – and all employees have barcodes – so jobs can be monitored and data can be isolated or collated as needed
  • They are an essential part of our commitment to customer service, realising time and cost efficiencies, driving performance, ensuring quality, maintaining responsibility and offering traceability
  • They allow us to:
    • Provide training and support to be given to staff who are encountering delays on a job
    • Ensure a smooth workflow by lining up jobs for those who are nearing a project’s completion
    • Spot trends and variances whether positive or negative, to ensure future improvements
    • Retrospectively check customer or project data against exact timestamps to identify issues or performance markers

The scores on the doors for dashboards

A recent Aberdeen Group study into Manufacturing Operations Benchmarks confirms what we discover every day as we use real-time analysis to prevent problems, guarantee reliability and drive cost-efficient optimisations.

Here’s what it discovered from a survey of 223 organisations at the cutting edge of manufacturing services:

  • About a third of these handled plant data via real-time/event-driven dashboards with role-based data accessibility, navigation, aggregation and drill down
  • Real-time operational dashboard users were twice as likely to have visibility of critical real-time areas such as quality, compliance, global operations and processes

 improve real-time visibility

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  • Because of this visibility, 71 percent of dashboard users have the ability to collect, plan and schedule, aggregate, analyse and respond to real-time manufacturing events − nearly three times the rate of non-users
  • They also have improved their time-to-decision at a rate 5 times greater than non-users

Dashboards lie at the centre of a perfect storm

Commenting on the role of automation, data collection and real-time analysis in driving our business, Stewart Gadd, our Technical Director, affirmed that:

‘Chemigraphic relies on the strength and insight provided by the data network that runs throughout the company.

Collecting, analysing and acting on data, whether it relates to customer purchases, productivity levels of staff or the efficiency of internal systems, is vital in measuring and improving our overall performance.

By tracking spikes, dips and other trends in the data we collect across the business, we can start to make observations on what is working well, what needs to change and successes we need to celebrate and champion.’

We intend to stay right at the centre of this perfect storm.

Mind the gap! Small data variations may suggest big problems

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Quality measurement plays a pivotal role in helping drive stability, prosperity and growth – and that’s good for everybody, especially in these uncertain times. Within the details of quality data are small differences – gaps – between predicted and actual results, and a thorough examination of these gaps, even relatively small ones, can point to wider issues of commercial management. Minding these ‘gaps’ goes beyond just collecting quality metrics and conformance data, it’s about getting to the root cause in order to be operationally-efficient and ultimately sustainable, with all the benefits this brings to customers.

We’ll look at a few areas where a rigorous ‘mind the gap’ ethos within commercial management can deliver clear customer advantages.

Scrappy data leads to higher costs

Scrap is the commonly used term for what’s rejected as “non-compliant” after a production job. The usual issues are damaged or faulty items, which can be blatant, but can also include less tangible issues as borderline tolerance issues, temperature or time-dependent failures, failures under one set of circumstances but not another identical situation, and subjective defects, especially cosmetic imperfections. Companies may absorb scrap as an inevitable cost of manufacturing but failing to at least track and investigate the causes of scrap can be a lost opportunity to identify a number of issues: inefficient manufacturing processes, supplier problems, inappropriate or poorly applied acceptability criteria, tooling issues, manual and handling issues or even poor documentation.

We make sure that even relatively small value materials are quarantined and go to a Material Review Board (MRB) that consists of sales, quality, purchasing and production, where a joint decision is made on disposition. The MRB asks questions like:

  • What’s the root cause of this material being segregated and quarantined?
  • Are defects physically repairable? Will the result be fully compliant? Will the repair be acceptable to customer? If not, will the customer concede in this instance. Should we instigate a new repair process?
  • Is there an underlying defect in supplied materials and can this be compensated by the supplier?
  • Is a material truly non-conforming or just sub-optimal? Is the acceptability criteria properly defined and applied?
  • What is the repair cost vs replacement cost vs item value? Are there other strategic reasons for extra efforts for recovery in this instance, e.g. to complete a consignment; no time to source alternatives; a one-off build is inefficient, or other reasons.
  • Is this incidence part of a trend? i.e. the individual part value may be insignificant, but the ongoing accumulated cost could be substantial.
  • Is this incidence an indicator of a wider or more systemic problem? Will the benefits of a corrective action improve capability in other areas?

This MRB process also helps to ensure that standards are correctly interpreted.

Scrapping not only has a direct effect on materials used in production and costs money but there’s time and labour spent dealing with the disposition. Monitoring the scrap data provides opportunities to build leaner manufacturing processes by looking at:

  • Who is handling the materials and how frequently?
  • What are the costs of scrapped materials?
  • Can any parts be salvaged for reuse of return?

Longer job times can actually lead to better business

Every production job has a job time. These may vary enormously – and even on repeat builds job time can vary depending on which operators have been assigned and the batch size. Typically, we put a traffic light system in place to monitor the data. From a commercial management perspective, it’s important to focus on growth and stability and ask questions around the red and amber lights:

  • Why did that job make nothing?
  • Is that a continual loss making job?
  • Was there an excessive amount of scrap on the job?
  • Did we over-run time?
  • Where did that cost occur?

Growth and stability improvements are typically made not from simply replicating sales in the best performing customers but looking at the bottom performing jobs and addressing those issues. By collecting quality data over a long time, it’s possible to determine whether there’s exceptional circumstances or a persistent problem.

The return of the return

Returns under warranty happen for lots of reasons. Where a product doesn’t function in the intended manner due to a fault then it is clear the responsibility lies with the manufacturer and it is their liability to fix the problem. However, a product may ping-pong back and forth between manufacturer and supplier before somebody intervenes to halt the process. By then there may be limited options, having been inspected by both parties without anybody accepting liability. In these instances it remains very important to maintain accurate detailed data.  There might be an underlying quality defect – a board might be delaminating after the components are mounted, for instance. This would be an issue of the materials supplied and in these instances it might be appropriate to address issues of compensation with suppliers.

The age of returns is critical too. Within the complex and fast-paced transactions of a modern manufacturing environment, materials can be put aside for a variety of reasons. Over time the pile can accumulate. When someone eventually addresses this pile of returns, the original reasons for the segregations may be lost and it can be tempting to simply return the goods to the supplier.

Detailed quality data generates lots of opportunities to improve a process. Being mindful of the small gaps in quality data makes a big difference in the long run.