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Fast, cheap or good? Feeling trapped by the iron triangle?

12 February 2021

Do you want it fast, cheap or good? It’s a question we’ve all been asked at one time or another.

In manufacturing, it reminds us that the quality of an end product hinges on two other variables - how much you’re prepared to pay and how long you’re prepared to wait for it.

What is the Iron Triangle?
The image of the Iron Triangle (otherwise known as the Quality Triangle) illustrates the inescapable relationship between these three points - quality, cost and time.
   
It shows us that project delivery is subject to a triple constraint.  You cannot change one priority without having an impact on at least one of the other two.  
In other words…  If you want to increase a product spec, you’ll have to pay more.  If you don’t mind skimping on overall quality, you can have your product cheap and quick.  But, if you want it good AND cheap, then you will probably have to wait a bit longer for delivery than might be ideal.  

OEMs - outsourcing the iron triangle
For OEMs looking to outsource their manufacturing, these competing demands are traditionally handled in different ways. For example, you might have very specific requirements for raw materials or components that are difficult and time consuming to source. If timelines are slipping you might choose to pay more to get them more quickly, or pick another supplier who can provide an alternative of acceptable (but not necessarily identical) quality to deliver on time.  If achieving the lowest possible cost is your primary objective you could choose the most basic level of product specifications in materials and assembly to get a product out to market as rapidly as you can.

One thing is certain, though, you can’t expect to have all three objectives prioritised equally in one deal.

Getting the balance wrong
And what’s more, if you get the balance wrong or misunderstand what the market really wants, you can lose customers and jeopardise your entire reputation. A quality product delivered on time, but outrageously priced may not sell and be undercut in the marketplace. A timely, cheap but poor quality product may not answer customer requirements of longevity and dependability.  This too, might end up disappointing your customers.

Outsourcing is not all about cost
When it comes to outsourced manufacturing, particularly at the specialist end of the market, the battle lines have been carefully redrawn over the last 10 years. A race to the bottom in terms of price in the outsourcing world has been replaced by a more nuanced understanding of the value a good EMS provider can bring to the equation.  The constraints of the Iron Triangle have been pretty well understood and negotiated around (in more or less combative ways).

Disruption and challenge
But then came Brexit and Covid. OEMs and EMS providers have been challenged as never before. OEMs faced with changing export rules are looking to become more competitive and find new cost savings.
At the same time, EMS providers have lost clients and money in the Covid chaos and are looking to replace them and keep growing.  Capacity is outstripping demand. There is jostling for position. The manufacturing sector is continually being told to brace themselves - both for uncertainty and new opportunity - while often being unclear exactly where those new opportunities might lie:

"We will build on our existing strengths, from cybersecurity, machine learning, microelectronics design and composite compound chip technology to biotechnologies and life sciences such as genetics and cell therapies. At the same time we must develop new strengths in emerging sectors."
UK Government, Industrial Strategy: building a Britain fit for the future

Brexit and Covid-19 are driving new deals
The unknown quantity of the post-Brexit landscape is leading many outsourcing companies to think about expanding their range, to move beyond their traditional scope to attract new clients.  They are exploiting agile mindsets and aggressive pricing strategies to break into new markets.  Some EMS providers are making ambitious promises to be fast and cheap without sacrificing quality.  And many OEMs are responding to these calls and the low cost deals on offer from these companies.  

A new deal check list
The temptation to switch suppliers at this time might be irresistible. But before you make the leap it’s worth thinking about the iron triangle and wondering what compromises have been made to get you that irresistible price in the first place:
  • What are the processes they are going through to quote for your business? Can it be relied on? There’s a useful blog post about that here.
  • Have they got the skills and experience to deliver what you need? Is this a new sector and product line for them.  Are you going to be a guinea pig for them?
  • Is the quote you have been offered a ‘one off’ or is it sustainable over time?
  • Have you run any checks to verify the stability of their businesses at this time?  What’s the reason for their sudden interest in your company and the opportunity you represent?
It’s never an easy process to choose and switch to a new supplier.  And it’s worth remembering that any annual saving from a switch may be lost if you have to return to your original EMS provider after a period away.
It’s undoubtedly a hugely competitive market out there, with some harsh new realities for OEMs and EMS providers.
And EMS providers are going have to work harder to demonstrate the value they bring to their customers.  

What has your EMS provider done for you lately?
If the triple constraints of the iron triangle are immovable, your EMS provider needs to find new ways to move the quality needle over time.

A Lean-Agile approach should be constantly stripping out waste to deliver more value to customers. If you’ve been with an EMS supplier for some time you should be aware of this in all the incremental service improvements they have been offering over the years.  At the same time, in the Post-Covid, Post-Brexit world services like value engineering should be delivering the intelligent cost-saving changes that will give you the competitive edge.  

EMS providers who are committed to continuous improvement will be in an ongoing process of refinement in their delivery of your end products. If you haven’t see those kind of improvements, then maybe it is time to move.







 

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