The current state of innovation in the marketplace is both fierce and fast-paced. Automotive OEMs and tiers that collaborate the closest with their supply partners will accelerate this innovation even further. Specifically, as an increasing amount of connected, electronic hardware is loaded into vehicles, electronic and electrical systems development will be a core purchased engineering service. Due to the speed, bandwidth, and skills required to design and develop autonomous vehicle systems, companies will continue to rely on supply partners to augment their internal teams.
We recently sat down with Steve Polakowski, President at ESG Automotive, Inc., a leading global electronic and electrical system engineering services firm, to aid our efforts in assembling a list of top tips that every supply chain leader should know when sourcing electronic and electrical systems. In assembling our list, we concentrated on the tactics outside of the typical procurement KPIs: cost, timeline, and experience for sourcing services. We instead focused on supplier engagement, things to look for, dos and don’ts, and successfully-proven agreement structures.
When should you contact supply partners?
- One can engage potential supply partners at any time but earlier is better. Bring consultants in for brainstorming, dialogue, and input in the planning process.
- Consultants can help create a scope of work from feature/function list and develop preliminary engineering budgets, work plans, and team structures.
- Electrical and electronic systems are increasingly complex. Their interoperability is not as simple as attaching mating parts. There are challenges in the communication and network compatibility of these components. Early assessment and planning are critical.
What should you look for?
- A company with a proven track record in managing complete vehicle programs or complex systems. There is a big difference between having solid automotive system engineers and having engineered solid automotive systems.
- Customers should look for an electrical and electronic partner with deep knowledge of process management, systems engineering, network communications, and vehicle architecture development and testing.
- Focused domain expertise should be required, as relevant to the project, (Connectivity, Infotainment, ADAS, eMobility, Cybersecurity…)
- Select companies with an independent and agnostic view toward technologies and parts. You don’t want a firm who will be biased toward engineering in their own offerings of parts.
What are the dos and don’ts?
- Outline key project objective deliverables and timing. When sourcing complete vehicle or system projects, define the preliminary bill of materials, level of change, new, modified, carryover, preliminary sources, and surrogate architectures.
- Engage and trust your supply partner. They are an extension of you and your team. Open disclosure and dialogue foster success.
- Don’t thrift out work to reduce budget unless all tasks are understood and assigned to someone (i.e. clients’ own employees, component suppliers…). There are certain steps that can’t be skipped or short staffed. Look for comparable reference projects in advance to gain better understanding.
How are the best supply agreements structured?
- Organization structure should be built around a strong technical project team lead with architecture and wiring, systems integration, and test knowledge. Specific component and domain responsibility as required based on the amount of carryover versus customized work.
- Commercially, time and material contracts are best for the engineering service supply partner when scope and starting reference are unclear.
- Fixed-price outcome based is best for buyer to force timing and cap spending, if they have sufficient program definition.
- Project and deliverable based is best for both when enough scope and assumptions definition can be provided while still providing flexibility.
- In any of these scenarios, parties might consider a phased approach which allows for specific objectives to be completed, allowing advancement of the project while providing improved definition and comfort between the companies.
With many global automotive OEMs in agreement that self-driving cars could hit the road four years from now in 2020, the frantic pace of innovation is not expected to slow down anytime soon. Thus, supply chain professionals within electronics and electrical systems must work to not only familiarize themselves, but institutionalize these sourcing tips into their sourcing process to increase the likelihood of program success.
Established and upstart OEMs are all taking vastly different strategic approaches to bring connected technologies to market. In our experience, early supply partner involvement is the consistent trend across OEM size, platform type and technology. OEMs that develop true partner-focused relationships with supply partners are able to co-create the ideal supply agreements, leading to lower costs, condensed timelines, and improved technical results.
We hope the above 15 Tips for Sourcing Electronic & Electrical Systems aid you and your teams’ efforts as you incorporate some of these actions into your next electronics and electrical systems sourcing initiative to drive supply performance.