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Managing risks is the key to working with suppliers in the Far East. If you are able to have a working relationship already, with a good core of suppliers, the risks is minimized, only to a certain point, but at least there is a familiarity which exist already.

Being able to manage cost, supply, capacity and terms while maintaining business ethics is the key.

The attitude from a lot of people doing this type of work, is that supplier in the low cost regions, are so busy, that they have 10 to 20 customers coming to them to do their work. That is not true. You are still the customer, and suppliers that are financially sound will work with you.

He found a new supplier to source metals parts. To minimize the financial risk, supplier agreed to do tooling, invest their money to do it, to prove their quality and workmanship, to get the opportunity for business.

These are the suppliers you need in your network. Not some unknown.

This can mean domestically or international. Globalization does not necessary mean moving everything overseas. This can mean commodities or suppliers.

Suppliers and commodity, where do we want to be and how do we manage that part of it. How do we leverage products and volume to get best pricing?

He took three commodities, Plastic, Metals and Electronics and shared the information on how we plan to work together. The metals knew some electronic suppliers, and plastic suppliers.

Globalization is only good, tailored to a companies' need, not to the supplier's need.

It is like gambling, only it could be drastic financially if proper research is not done. Cost is not always a factor when dealing with international sourcing. Need to evaluate other important issues with each suppliers.

He made sure all his contacts were good. All of the suppliers he had dealt with, even if there was no business there, still kept in touch. This help to select certain suppliers for certain projects. The risk factor is minimized because he already know what they are capabable of, eliminating site survey, and putting in investments to bring people over to qualify. Qualification is done through 1st article approval, then the company sends over the representative to have a face to face and do the site survey.

Kanban has to be tailored to each supplier. The key here is to be able to provide the supplier the goals and objectives of the company to our suppliers so everyone is on the same path.

He set a system where it was a win-win for both supplier and his company. He provided 4 weeks, two hard and 2 forecast of the parts to be produced. Minimum qty of 1 month worth of inventory, some suppliers able to carry up to 3 months worth. Minimizing production downtime, increasing inventory turn, reducing inventory values.

Implement Kanban or consignment plans to help eliminate leadtime issues. Leadtimes need to be real, but if agreements are in place, are followed, then lead time does not become a factor, unless the part is over-forecasted.

Leadtime. He did not like forecast but most suppliers want one. Sometimes the numbers are lower, some are higher but each month is different. The leadtime can be corrected and controlled through a Kanban or consignment agreement.

Using this software to share to everyone involved the goals and accountability of dates provided.

He uses MS Project because it is an accountability tool. Dates are provided, agreed upon by person responsible, and need to be carried out.

Transition project time line, was provided to everyone on the team. He introduced dates, functions, targets and who was responsible to make sure it happens.

This helps to control what is out there, because memory alone will not do it.

Understanding the process cost factor will provide a reduction quicker than outsourcing. Once that is determined, then if cost is still not competitive, then we move to outsourcing.

He took a look at a group of boards, decided if it would be more economical to go to a four layer board, to make one raw PCB for 4 versions. Ended up two boards were the same the other two could not due to the IC used. But ended up using 32 up versus 8 up. Cost reduction.

Accountability is the key in project management. Follow ups and maintaining a set schedule to prevent any extra incurred cost.

One of the functions of sourcing

He uses this function mainly to help manage suppliers. This function can be done by a buyer/administrative assistant to open orders, expedite orders, and other functions.



Not many people understand or know what this is. If we are able to identify the risks, and have a plan if that risk is achieved, there is a plan to handle that.

Identify, plan, then action.

He used his risk management experience with low cost regions. How? Four things: financial, capacity, location, and pricing. Selecting supplier in LCR is difficult so being able to communicate and build the relationship is key.

He built the relationship by having company invest their resource to make it where it works. Invest time and sometime financial to make it work.

Vendors, suppliers, we need to treat each differently. Are they vendors, partners or just a small business owner, middle man. We need to understand that to be able to negotiate and leverage our buying power

Implementing a supplier agreement, where it is a win-win for both supplier and company.

He reviewed all agreements in placed and ended up re-writing it. Made the suppliers feel that their hands were tied and it favored the company, not the supplier. In order to open the line of communication, company and supplier need to understand each other. what the goals are and what the objectives are. Then combine to see how to achieve these goals.

Cost reduction should not be based on a "cost based" number but has to include the "soft" cost that most people do not realize.

Case in general happen at a company, where moving PCB assemblies to another supplier. The number provide was inflated and not accurately presented to management who made the decision to move forward with the project.

As soon as the project was provided to me to review, the data I derived from all the information provided, from buyer to supplier, we made a drastic mistake. The numbers ended up losing profit and spending unnecessary capital to get a losing profit.

How did I correct this? Presented the data in real terms, NRE, Tooling, Engineering Time, Production downtime, Inventory, Logistics, Quality, Production, and the only way to save this was to go find alternative parts that were cheaper that what was on the AVL.

This would make a positive out of something that would be a major cost increase effect to the projects and production.

Need to be aware of all cost, to get your true cost reductions