In manufacturing, we are often asked these two questions, “How much are you prepared to pay”, and “How long are you prepared to wait?”. This highlights to us that the quality of our end product is based on two key variables; PRICE and TIME.
But what is the Iron Triangle?
You may have heard about the Iron Triangle before, while sometimes also known as ‘Triple Constraint.’ Initially, the Iron Triangle concept presents three essential components of a project — Scope, Cost, and Time. All these elements establish the product’s quality. So to launch a functional product, a business needs to define the scope of work, set the deadline or create a timeline with essential milestones, approve the cost from the vendor, and outline the quality acceptance criteria for the product they expect to get. To have the Iron Triangle explained, we need to mention that its fundamental idea is to keep things balanced. The changes in one of the constraints are immediately compensated in others, and consequently, the quality suffers.
If you want quality to be good, but pricing to be cheap, you are looking at waiting that bit longer for delivery. If you don’t mind quality being skimmed, it would mean you could have your product quickly and for a much cheaper price.
The choice is yours. However, the relationship between these three qualities is defined and rigid.
Outsourcing with the Iron Triangle
Outsourcing turns out to be an efficient solution for a significant number of companies.
For OEMs looking to outsource their manufacturing; cost, quality and time are handled in different ways.
For example, you might have very specific requirements for raw materials or components that are difficult and time-consuming to the source.
– If timelines are falling you might choose to pay more to get them quicker, or potentially 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 the 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 that is certain, you can’t expect to have all three objectives prioritised equally in one deal. You must remember that the changes in one of the constraints are immediately compensated in others.
There are many factors to be discussed when it comes to Electronic Manufacturing and the Iron Triangle. OEM’s need to realise that there may be disruption and challenges, the cost is not always the number one priority, and how getting the incorrect balance can jeopardise your entire reputation.
We know from March 2020, the Electronic Manufacturing world has experienced, disruption after disruption due to the COVID 19 pandemic, followed by Brexit. These are challenges we have faced like never before, from changing export rules to finding new cost savings.
EMS providers have faced nothing but uncertainty with lead times increased up to 52 weeks on some components, capacity outstripping demand ,and loss of business clients and money.
Due to Brexit, some EMS providers are promoting new deals to stay in business and grow. Some outsourcing companies are considering moving beyond their traditional scope to try and attract some new clients into their business in the hope of further growth. Some EMS providers are even making ambitious promises to be fast and cheap without sacrificing quality – But would the Iron Triangle say this is even possible?
Although pricing is a key element in finding the best EMS provider, it isn’t always the number one priority. The outsourcing world has been replaced by a more common understanding of the value a good EMS provider can bring to the balance.
The constraints of the Iron Triangle have been pretty well understood and negotiated in today’s world.
If you misunderstand what your market wants, you are in line for jeopardising your entire reputation.
A quality product delivered on time, but outrageously priced may not sell and could be undercut in the marketplace. A timely, cheap but poor quality product may not answer customer requirements of durability and dependability. This too might end up disappointing your customers.
Finding the correct balance for your market is crucial.
If the triple constraints of the iron triangle are fixed, your EMS provider needs to find new ways to move the quality needle over time.
Important factors to consider:
- The Businesses needs to come first
- You must have the responsibility for the product
- Lean-Agile product management for all clients
- Cross-Industry Experience
- Cost-Saving Delivery methods will give you the competitive edge
If you don’t see these elements within your provider, it may be time to consider moving.
Time may have come, not to throw away the Iron Triangle, but to add another one on top where we measure the triple constraints (time, cost, quality) as well as the three strategic dimensions (impact, relevance, and sustainability). What is also important is that we spread this ethos across our team.
It is not enough that you understand the end game and what the project is ultimately trying to achieve in the bigger scheme of things; the entire team needs to recognize it. Everyone must have a client-centric, cost-conscious and strategic outlook, and everyone must be focused on the same goal which is that of delivering the most suited product or service most effectively and sustainably manner. As obvious as it may sound, adding utmost value to the client’s long-term goals is far from reality on many projects.