Establishing terms and conditions to create the win-win

Posted on December 13, 2011 by Administrator

Defining goals up front with your contract manufacturer can help you properly establish your terms and conditions to establish a win-win partnership between the two parties.  In general, this is what you are looking for:

  • Lowest total cost
  • Reduced Inventory
  • Minimized risk of obsolete inventory
  • Limited purchase order commitments
  • No overproduction
  • Reduced wait times and logistics costs
  • Streamlined work flow
  • Improved responsiveness to changes in demand
  • Minimized impact of engineering design changes to manufacturing costs

In addition, the contract manufacturer finds it beneficial to have an annual contract with the customer to allow for better control of the manufacturing process, shipments and the production range.  It also provides contract manufacturers the ability to negotiate with their vendors, taking advantage of economical order quantity. The annual contract doesn’t necessarily mean the customer takes on more liability but it provides the contract manufacturer with a better planning window.  The customer can control his liability by doing the following:

Shipments based on Customer release

  • No reschedules required
  • Line resizing when appropriate / based on forecast
  • Cancellation based on 30,60,& 90 day windows

Customer determines production range

  • For example; 100 to 150 per month
  • Additional provisions for Ramp Planning
  • Provides rolling six month forecast

We recommend the following guidelines for defining fixed windows for reschedules and cancellations:

First 30 day window:  All material and labor applied up to the stop date is 100% the responsibility of the customer.

Second 30 day window:  No labor, and only material on hand with lead times greater than 4 weeks.

Third 30 day window:  No labor and only material with lead times greater than 8 weeks. Plus material that is in place due to mutual agreement for the purpose of meeting release ranges and ramp readiness plan.

Engineering Change Orders: Customer is responsible for excess and obsolete material due to ECO’s inside negotiated windows for reschedules and cancellations.

To summarize, the benefits to established terms and conditions could help a relationship by providing:

  • forecast visibility to help lower liability, negotiate best pricing and enter into Kanban agreements,
  • consumption of material based on customer demand to simplify production planning and support and eliminate interruptions in material flow,
  • the most efficient utilization of space.
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Customer service recognizes the power of knowledge for both Segue and the customer

Posted on October 6, 2011 by Administrator

For today’s contract manufacturer, the changing economy creates an ever-present emphasis on pleasing the customer. While this requires a firm understanding of what the customer wants and needs, it also means that the customer should have the same understanding of exactly what a good contract manufacturer can do for them.

1. Quality

2. On-time delivery (OTD)

3. Cost

4. Lead Time

5. Communication

In other words, “better, cheaper, faster” is desirable, as well as solid support and communication. Surfacing here is the role of customer service, the primary point of contact at Segue. Customers need confidence that their orders will be delivered on time with the highest level of quality. Truly understanding what they want puts you in an optimal position to help them. The more knowledge that transfers between Segue and the customer, the more successful the relationship becomes.

After the acquisition of Sanbor in late 2010, Segue became an immediate supplier for their customers, including some sizeable accounts that require daily management. One of the biggest challenges this has imposed on customer service is how to integrate these customers smoothly into Segue’s order process without tainting their expectations. It has become vital to do our homework; aside from fully understanding what they are buying, we must consider what the customer was accustomed to receiving. It could be a repeat build that they have been buying for years, so price and lead-time accuracy may need review. In some cases, for frequently built assemblies, our factory in Xiamen may have previously agreed to keep certain long lead-time materials in inventory so that they can turn orders faster. Digging up this information may require leaning more on sales or management. Sometimes helping the customer means letting different departments help each other, but these situations can be recognized as learning experiences. Thorough knowledge of our new accounts is crucial in maintaining customer confidence and is continuously approved upon in our day-to-day relations.

Segue President and CEO Peter Frasso, knows the value of using the customer’s voice to fuel his business and strive for continuous improvement. Prior to Segue, Frasso held numerous management positions in engineering, marketing and production, giving him a well-rounded perspective on the art of manufacturing. He was a 1997 Malcolm Baldridge finalist for manufacturing, a prestigious program that recognizes performance excellence. Frasso works hard to abide by the three core principles of Baldridge: assessing customer needs, organizing the company and factory to exceed these needs and measuring actual performance. As a Northeastern University alum, Frasso has recently been featured in the school’s Encore Magazine, where he shares his success in building Segue around the customers.

Click here to read the complete article.

submitted by: Meredith Roberts, Customer Service, Segue Manufacturing Services

 

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Understanding the benefits a high-level assembly strategy

Posted on October 3, 2011 by Administrator

High-Level Assembly (HLA) is a proven operations strategy that allows OEMs to focus its in-house efforts on the top-level assembly to simplify production, minimize inventory, floor space, manufacturing overhead and direct labor.  Often, for companies that serve cyclical markets, such as semiconductor equipment and alternative energy, shifting control to the contract manufacturers and utilizing a high-level assembly strategy allows companies to control fixed costs in an upturn and preserve a lower breakeven point in a down turn.

The financial benefits from employing such an operating strategy can include the following:

Convert fixed costs to truly variable

  • direct labor, manufacturing supervision and support
  • procurement and materials management
  • incoming and in-process quality
  • manufacturing engineering and product design support

Lower cost by leveraging suppliers

  • lean low cost structure
  • global supply chain and commodity leverage
  • ability to leverage fixed costs across higher volume

Reduced working capital needs

  • Supplier owns and manages raw and in-process inventory
  • Cash to support operating costs

There are also many operating benefits that can be realized with an effective implementation of an HLA strategy:

Reduced time to market

  • focus on core competencies
  • concurrent engineering with key suppliers

Reduced manufacturing cycle times

  • management of fewer parts
  • improved ramp capability
  • high level assembly at factory or customer site

Simplified trouble-shooting and field service

  • trouble shoot at the module level
  • advanced exchange possible

Reduced space requirements

  • office space for production support
  • stockroom
  • product floor space

An HLA Case Study:

Below is a case study from one of Segue’s customers in the alternative energy space. Over time, the manufacturing of a complex control cabinet assembly was shifted from in-house production at the OEM site to a consolidated turnkey manufacturing solution with Segue.  As the product shifted , more value was realized by the OEM, as Segue became an extension of the company’s own manufacturing capabilities.  In addition, Segue was able to leverage its presence in both the U.S. and China to take advantage of the benefits of global manufacturing and localizing components.

Manufacturing Operations:

Cable and Harness assembly, machining, Kanban, JIT, Lean Manufacturing, DFT

Before:

  • Customer managed multiple vendors
  • Discrete order placement drove high material liability in a cyclical market
  • Customer sourcing and engineering of all components
  • Customer ECO cycle time was very long

After: Turnkey Mfg Solution

  • Customer managed a single supplier
  • ECO cycle time reduced due to supplier capability
  • Complete JIT/DFT Solution using Vendor Managed inventory reduced liability by a factor of 5

Supplier capability provided Vertical Integration and the ability to localize production for a key market.  In addition these capabilities enabled lower cost and a significant reduction in ECO implementation lead times.

Customer Benefits:

  • 15% Cost Reduction in first year
  • 20% cost reduction the second year
  • 60% Reduction in ECO implementation cycle time
  • 80% Reduction in inventory and Purchase order commitments
  • A scalable production environment – 5 to 20 systems per week
  • Space reduction of 5,000 – 10,000 sq feet
  • Reductions in Materials and Manufacturing Overhead
  • Global sourcing and localization (cabinets in China for China market and cabinets in the US for the US Market)

 

 

 

Posted in Contract manufacturing, Electro-mechanical assembly, Manufacturing, Outsourcing | Leave a comment

Quality continues to be the #1 reason to purchase, or is it?

Posted on June 23, 2011 by Administrator

We surveyed our Lowell, Massachusetts and Xiamen, China customers separately to see what criteria was most important to them when selecting a contract manufacturer.  This is a question we always ask in our customer surveys and the results are always enlightening.

First, notice how both sets of customers indicated quality as the number one reason for purchasing from a particular vendor.  However, for Xiamen customers, the 2nd most important criteria was cost while for Lowell customers, it was on-time delivery.  This is indicative of why our customers choose overseas manufacturing. (click images to enlarge)

Lowell purchasing criteria

Xiamen purchasing Criteria

Also, as stated, respondents indicated that the number one reason for choosing a supplier is quality. However, real life examples continue to contradict these results as suppliers are more often than not chosen based off of lowest price. This often works against the customer when problems occur that cause production delays or repair problems in the field that far exceed the costs achieved from selecting a well-qualified, quality-oriented supplier. ISO-9001-2000 and ISO 13485 along with the use of Demand Flow Technology (DFT) and the seven step problem solving process are strong indicators that a contract manufacturer has the tools and processes in place to drive operational efficiencies, reduce manufacturing cycle times, working capital, and solve complex engineering problems. Join the conversation and let us know what you think by replying below.

Posted in Asian manufacturing, Contract manufacturing, ISO 9001, Manufacturing, quality manufacturing, Segue Manufacturing, Segue News | 3 Comments

7 tips to reduce quote cycle time

Posted on June 21, 2011 by Administrator

Frank Hawks, Segue’s quoting specialist, has been providing quotes to Segue customers for many years.  He knows the importance of getting back to customers quickly and offers these 7 helpful tips to reduce the time it takes to get your quote in hand:

  1. Send your BOMs as an Excel file instead of a PDF.
  2. Make sure your BOM is accurate!
  3. For commodity items, list the manufacturer’s part number not the distributor part number – often times the contract manufacturer can get it cheaper and faster (e.g., AMP 205204-4 vs. distributor part number A1038-ND).
  4. For components, provide manufacturer’s name and part number.
  5. Provide the mil-spec for wire, not the wire manufacturer’s part number (e.g., UL1569 vs. Alpha 3051)
  6. If possible, provide alternate part numbers, it may help with delivery times (e.g., MIL-W16868/1-BFB-3 or UL140 22AWG Red vs. Alpha 7131)
  7. And of course, legible, accurate and complete drawing packages always help to speed quote time!

For additional help with your quoting, please feel free to contact Frank at fhawks@segue-mfg.com.

Posted in Contract manufacturing, Manufacturing, Outsourcing, Segue Manufacturing | Leave a comment

Using the Voice of the Customer to Fuel Growth in Manufacturing

Posted on April 13, 2011 by Administrator

Back in the mid-2000s, the need for a certain type of contract manufacturer—one that was more sophisticated in the engineering, quality and production environment than a mom-and-pop shop, but flexible enough to support a high-mix, low to moderate volume product environment – was identified. Based on this need, in 2007, Segue Manufacturing Services was established from the acquisition of Cable Designs and Manufacturing (CDM), a cable and harness company.  Immediately, the company began surveying its current and target customers, training and empowering its employees and developing a lean manufacturing environment in order to address the niche identified.  Under the Segue brand, the company established itself as a low volume, high-mix contract manufacturer, providing end-to-end solutions for its customers.

A technique frequently incorporated into Segue’s growth strategy is to survey customers at all stages of the buying cycle and during all customer interactions. Listening to the voice of the customer is essential to continuous improvement, total customer satisfaction and understanding future requirements to help drive a company’s business strategy and success. In addition, education and empowerment of employees and work teams directly results in a higher level of customer satisfaction.

We are in the middle of repeating a customer survey to help us understand how Segue can continue to meet your needs and improve our relationship with our customers.   If you are a prospect or an existing customer, please take our survey.  We would love to hear your input!

Posted in Contract manufacturing, Electro-mechanical assembly, ISO 9001, lean manufacturing, Manufacturing, Outsourcing, quality manufacturing, Segue Manufacturing | 1 Comment

FAQs on doing business in China

Posted on January 31, 2011 by Administrator

In our last post, we announced the acquisition of a contract manufacturer in Xiamen, China to expand our global competitiveness and our capabilities. It has been an exciting few months and we want to continue to educate our community on the benefits of our expansion and answer your questions.

First, we have talked to our customers and they desire a different product delivery mechanism. They want to place blanket orders, have Segue institute kanbans and a distribution center in the United States, and thus receive a seamless supply of product and a significant improvement in delivery times.  We recognize that this is essential to our success in the future and we are working to put this in place and improve our customers’ position as well as Segue’s position here in the States.

Next, through Segue Xiamen we will be able to competitively source products and components to be used in products built in both Xiamen and our U.S. locations.  Our local position in Xiamen can help us do a better job meeting the needs and cost requirements of all of our customers.

Now, to answer your questions:

FAQs on doing business with Segue Xiamen

1. How can I expect my deliveries to shift now that Segue has a facility in China?

Whether your product is manufactured in Lowell, MA or Xiamen, China, lead times should remain the same and the transition should be seamless.  If blanket order are placed, deliveries will be scheduled per your requirements and if necessary, we will consider Kanban programs to support your demand.

2.       How do you decide when and if my product moves to Segue Xiamen?

High volume, low mix, high labor content assemblies are most likely to move to Xiamen to realize the cost benefits of offshore manufacturing.  In addition, products that have components that can be localized, will also be considered.

3.       Will I see a cost reduction?

If you have manufacturing requirements with high labor content or if you are willing to localize suppliers for components, you should be able to realize a cost savings.

4. How can I benefit this year with the new acquisition?

Segue is now able to offer:

  • new production capabilities including over-molded cable assemblies, printed circuit boards and injection molded parts;
  • new sourcing capabilities for components and sub-assemblies, whether they are assembled in the U.S. or Xiamen;
  • localization of components and low cost assembly.

5. How do you deal with such a long delivery cycle?

The plan is for our high-volume customers to place blanket orders and to implement Kanban release mechanisms with reorder points to create seamless deliveries.  This will take some time to implement but it is Segue’s vision to implement this system within the year.

Please let us know your questions about offshore manufacturing and how it effects your cost and deliveries.  We hope this will be a running post as we continue to provide answers to the most frequently asked questions.

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Why Segue expanded into Asia

Posted on November 30, 2010 by Administrator

High volume cable assembly, Xiamen, China

Yesterday Segue announced that we acquired an OEM contract manufacturer in Xiamen, China.  I thought I would take this opportunity to talk about this growth strategy and why we decided to expand our business overseas.

Ten years ago, the majority of our customer base was within 50 or 100 miles of Lowell, Massachusetts.  We were a leading contract manufacturer in the area and serviced our customers with local support.  As we all know, times have changed and China’s manufacturing sector continues to grow and has developed a huge consumer base of its own. Manufacturing in China is no longer focused just on exports but on supporting its own consumer base.  Proximity to end markets is critical to the success of these manufacturers.

Fundamentally here are two reasons for Segue acquiring a facility in Asia:

1.       Our new facility has significant capabilities that we don’t currently have; primarily in printed circuit board manufacturing, injection molded cable and harnesses, and high volume assembly.

2.       Several of our capital equipment customers are located in China because their primary market is China.  They are building factories in China to support their local customers.  We need to be there to continue doing business with them.

In particular, the manufacturing that is moving to China is high volume, repetitive assembly and capital equipment.  Segue will be there to support this type of work as well as continue the low volume, high mix manufacturing that we excel at in our Lowell facility.  We are excited about Segue Asia because it has a 15 year history, it was and continues to be American owned, it has an excellent culture of quality and they bring to us a strong position in one of our growth markets – medical and life science.  Not only does it give us the opportunity to diversify our portfolio but it helps us penetrate the medical market as we focus on providing more value added services to those customers.

Our goal is to provide global reach for our customers with local support and service.  Learn more about the facility and our new capabilities on our website and please do not hesitate to contact anyone of us here at Segue to learn more about our new capabilities.

Best,

Peter

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Choose carefully between local vs. overseas manufacturing

Posted on October 1, 2010 by Administrator

I read an article recently in Modern Machine Shop “Modern Manufacturing in 12 Tweets”. The points are worth reading and if you are into Twitter, you can also post comments to each of the “tweets”. One of the twelve I found particularly thought provoking:

    “The United States is the world leader in terms of global manufacturing market share. U.S. manufacturing also has become significantly leaner, cleaner, more efficient and more responsive in just the last few years. To be sure, there are challenges. However, the idea that the United States is turning away from manufacturing is dramatically overstated. U.S. manufacturing will remain a leading economic force in the world for a long time to come. “

I recently came back from China where the average loaded shop rate is $1.50/hour. It is important to consider when this works most to your benefit. Typically, in labor intensive manufacturing such as high volume cable and harness, sheet metal and complex weldments, and die casting – places where there is lots of set-up and manual manipulation – this low shop rate is worth a second look. Segue leverages these lower prices into the products that we build and assemble in the United States. We leverage the high level assembly operation with overseas content to be competitive right here in the United States.

Remember, it is extremely important to choose carefully between local vs. overseas manufacturing. Always consider cost, logistics, cash flow and markets served. Many U.S. companies move manufacturing to China because that is where the product is being sold, local support is required and the growth opportunity in China is anticipated to be tremendous for decades to come.

-Peter

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Welcome!

Posted on September 13, 2010 by Administrator

Welcome!

This is my first post to our new blog, Tips, trends, solutions for outsourced manufacturing. We created this blog to provide the manufacturing community a place to share useful information, trends, news and successes in the areas of manufacturing, quality, outsourcing, and global sourcing.

We debated the idea of launching this blog as the manufacturing community hasn’t exactly “embraced” social media.  Then we realized a blog may be just what the community needs – a place to learn, communicate and share your successes and challenges in the manufacturing space. We encourage you to join in and participate!

So go ahead, bookmark our blog, email to a friend/colleague or add our RSS feed to your homepage (see how in the link below) and let’s pump up the volume within our often silent community. Of course we’d also love to hear your feedback about us and this blog and even what you’d like to see discussed in the future, feel free to comment!

Best,
Peter Frasso
President, CEO, Segue Manufacturing Services
and Blogger in the rough

P.S. Want to learn more about RSS and how to subscribe to a blog?  Check out this simple, straight-forward article.

Stay tuned to read my first real post on how entrepreneurs should leverage outsourced manufacturing to help manage their cash flow and ensure success!

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