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Single-source or second-source partner? We can be both
How we as a second source partner bring more flexibility to your EMS purchasing
Single source is the procurement of an item from just one source - and is quite widespread in our industry. Such business relationships often arose spontaneously in an early phase of the company, proved their worth and were then maintained for years. In most cases, even if the supplied company has developed significantly and now produces much higher quantities. Maria Schulz from the technical sales field service at A+B Electronic considers this to be a high entrepreneurial risk. A plea in favour of second pillars.
Admittedly, single sourcing is interesting at first glance
Single sourcing has clear advantages for companies: one contact person, possible price advantages due to the order volume, only one booking for an order, purchasing is bundled, correspondingly less administrative effort. The usually long-term relationships between a company and "its" single source also help with the joint development of new assemblies or precise coordination in logistics and packaging. The relationship between the single source and the client is also special: as a single source, we are aware of our special responsibility to the partner. We know the companies for which we are the single source particularly well, are familiar with the technical requirements down to the smallest detail and have a good rapport with our contacts. It is also a considerable advantage for our customers in particular if we know each other well. This allows us to enquire at an early stage whether we should keep capacity free for an assembly, agree a new framework agreement and reorder components - because then we basically already know when the customer needs what exactly for their products.
Single sourcing is only appropriate for very small companies
Every company that depends on EMS services has to think about it: Is a single source secure enough for us? What happens if our assembler is unable to source a component or if a production line is down for a fortnight? Can we cope with this delay and the associated loss of sales? After all, if a single source fails and there is no second source waiting in the wings, it usually takes several months to qualify and audit a new supplier. Depending on the complexity of the assembly and the availability of the individual components, this can take a long time. It becomes particularly critical if special approvals or tests are also required. Such a process can quickly take longer than a year.
A spontaneous production outage of the single source is expensive - and jeopardises the customer relationship in an emergency
Even experienced entrepreneurs are usually surprised at how expensive a production outage or delay can be - especially if there is no second source available to step in relatively spontaneously. That's why we are happy to offer our services as a second source for companies that have only had one mainstay of supply to date. In an emergency, we then know the technical circumstances and can rescue a project on time. In our industry, having a second source that runs in parallel is also an economic life insurance policy. We often grow in this position over the years together with our clients. Because if we can reliably step in, our business partners can also serve their customers more reliably.
Second source as an inspiration for innovation
Companies that have only used a single source for years have also received little impetus from outside for years. The innovative power of a new, fresh partner is missing. Single sourcing is convenient for both sides, but new partners can provide decisive impetus for the further development of your own value chains. Relying exclusively on the single source also means trusting the conditions on offer and accepting the status quo. This status quo may be acceptable, no doubt about it. But the competition never sleeps and is always looking for ways to produce more efficiently.
„As a second source in particular, we impress with our additional services in the areas of device assembly, conformal coating and logistics - and with the fact that we are strictly Made in Germany.“
Maria Schulz
Business Development
A+B Electronic
Incidentally, we also demonstrate this to our potential partners in a very practical way: we invite any company interested in EMS services such as THT assembly or SMD assembly to visit our production facilities. We are very transparent and always offer interested parties the opportunity to see with their own eyes how we produce, which machines we use and how we ensure the quality of the assemblies.
Too much sourcing diversity is also not sustainable
Sometimes we come across new partners who work with six or more suppliers. We are also happy to advise them and ask whether this is not too much of an administrative burden. Sometimes we can then bundle the purchasing effort and realise synergies together with the customer. Of course, very large and diversified companies need many sources, but this is often not necessary for medium-sized companies and causes more work than it creates benefits.
Do you have a reliable second source? If not, we should talk. Our core business is PCB assembly. But our strength lies in doing much more for our customers: coating, testing and complete device assembly are just three examples of many.
