Four Sourcing Challenges for Hardware Engineering

hardware engineering sourcing challenges

Inevitably, there comes a time in every software developer’s life when their thoughts turn to hardware. The right hardware configuration, when paired with your software, goes a long way to giving the end user an outstanding experience. However, while designing software is challenging enough, building the hardware – and sourcing the necessary parts – presents another set of problems entirely.

In the past, we wrote about the challenges that a budding software-developer-turned-hardware-engineer can expect to face. After you’ve selected the components you want to use, getting them (and getting enough of them) into your manufacturing process is a whole new challenge. Let’s take a look at the four major issues to be prepared for when sourcing components.

Don’t Forget the Box: An often overlooked challenge doesn’t even involve the electronic components at all. Your final product packaging is a very important consideration –
this is the material that will protect delicate electronic devices over a potentially long shipping sequence. All of these challenges apply to sourcing your product packaging as well.

Hardware Engineering Sourcing Challenge #1: Your Vendor

Finding the right vendor to supply your components is like finding a soul-mate. There may be plenty of choices, but it’s likely that only one is going to be right for you. As you look through your options, keep these two crucial elements in mind:

  • Lead Time – Some vendors may have lead times that vary widely (10 days for some parts, 6 months for others). Be sure to either find a vendor that can match your needed lead time, or plan your build schedule accordingly.
  • Order Size – Some vendors may not deal with companies that request smaller orders, but often the issue of order size is the issue of price. The smaller your order, the larger the per-piece price will be.

Knowing how these (typically overseas) vendors operate is crucial to keeping a supply chain running smoothly. Establishing the connections and relationships necessary to find the right component vendor(s) is often the most difficult part of sourcing for software developers newly embarking on hardware engineering projects.

Hardware Engineering Sourcing Challenge #2: The Culture

Language barriers and cultural considerations can have a huge impact on business agreements. Because the best pricing is typically available at the source, companies that engineer their hardware must be prepared to work with foreign companies – and that means understanding the local customs and culture. Whether it’s hard drives in Malaysia, chassis in China or motherboards in Taiwan, understanding the business culture is crucial to finding the right partner.

How do you say “No?” As an example, in Mandarin, certain inflections and tonal ways of speaking can be confusing for an outsider. Vendors can literally be saying “yes” but their inflection and tone means that they’re really saying “no.” The vendor will expect you to understand that they actually said no, and if you haven’t, your relationship (and hardware engineering process) will suffer.

Hardware Engineering Sourcing Challenge #3: Customs

Bringing hardware into the United States can always be a challenge. Specialized paperwork and tariff regulations require absolute accuracy. Customs and border protection agencies have the right to come back and request paperwork even five years after the initial delivery. If the import records are wrong, penalties can be levied. It’s critical that your hardware engineering team be well-versed and experienced in all the laws and codes that pertain to your product and components. The cost for misunderstanding can be staggering.

From a customer’s supply-chain management standpoint, the biggest concern is shipments being held or frozen. Inevitably, a container will be held back for further examination (or while erroneous paperwork is double-checked). It’s crucial during this time to have someone who understands the structure of the customs department so they can regularly follow-up on the release of those pulled items.

Hardware Engineering Sourcing Challenge #4: The Financing

As with all of business, sourcing challenges eventually come down to the financing. New customers are in a particularly difficult spot, as many vendors will require new contracts to have particularly aggressive financing terms (such as a 50 percent deposit in cash before accepting an order). Be prepared to acquiesce to stricter contract terms than you’d normally agree to (or to find another vendor, if one is available).

Held in Escrow: Many foreign vendors, especially when working with new clients, will not want to release the components unless they get paid first. This requires the use of a 3rd party escrow company, and that introduces yet another relationship to manage in the sourcing process. Be prepared to explore your escrow options so that you can be sure the one selected is reliable and fair.

Additionally, most foreign vendors will want to be paid in their own currency. The handling of funds – from wire transfers and tracking fluctuating exchange rates – can be complex and time consuming and will likely require the dedicated attention of someone on your sourcing team.

The Right Expertise for Sourcing

The advantages of running your software on hardware you’ve configured are significant – but the challenges that come with sourcing and engineering the hardware can actually distract you from what you do best: software development. Finding a hardware engineering partner can alleviate the challenges of sourcing (typically, such a partner will have experience dealing with foreign suppliers and potentially even have established relationships that allow them to avoid many of the “new client” challenges that arise).

Whether you handle your sourcing yourself or work with a managed manufacturing partner, your goals are the same: Create an excellent final product. In order to do that, you need to get the best parts (and at a competitive price). Prepare for those four sourcing challenges and you’ll have a good head start.