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www.us-tech.com
December, 2012 ElEctronic Mfg SErvicES
EMS and OEM Relationships: the Next 10 Years
have experienced squeezed profits and increasing demands from customers and competitors. Hopes have been high for regional manufacturing strate- gies, yet we see continued migration of manufactur- ing offshore. What are future strategies for both the EMS and OEM working together so that each runs a successful business in a tough marketplace? Looking forward to the next 10 years, we’re
W
highlighting the vision and strategic solutions de- veloped at a recent innovative, thought-leadership event in Silicon Valley. The brainstorming event, held on October 9, 2012, brought together 25 elec- tronics-industry executives, evenly split among OEMs, EMS providers, and suppliers. Their task: to creatively address five tough challenges facing the entire electronics industry today. The event was called “The Executive Think
Tank on Supply Chain,” and EMS executives par- ticipating included companies as large as Celesti- ca, Jabil, and Sanmina-SCI, as well as mid-sized and smaller companies such as Benchmark, Whizz Systems, and Digicom Electronics. There were five challenges discussed, along with some important insights from the executives in this full-day prob- lem-solving think-tank event.
Challenge No 1. Increasing shareholder value by reducing manufacturing costs and improving efficiencies, while still benefiting customers and communities.
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hat's ahead for EMS providers and their OEM customers? In the last decade, both sides of the supplier-customer relationship
By Pamela J. Gordon, President, Technology Forecasters, Inc. (TFI) The single most effective strategy for increas-
ing profits through decreasing manufacturing
costs and at the same time making customers hap- py is to deliver competitive solutions to customer problems with minimal hardware. The Think Tank executives called it “product virtualization.” Advantages from manufacturing fewer and small- er products are lower costs for materials, assem- bly, packaging, shipping, storage, and power con- sumption. The product or service also focuses on the customer’s true needs, rather than just provid- ing more “stuff” that doesn’t serve society. You can see that minimizing hardware also
reduces environmental impact: less to mine, fabri- cate, assemble, package, ship, store, power, and re- cycle. This model will reduce the amount of hard- ware that the EMS provides to the OEM, so to maintain and increase sales, the EMS will need to generate revenue through services and other means.
Other strategies include creating “virtual or- C
Hand assembly is no longer a viable option for profitability, except in products with special needs, such as military and medical.
ganizations,” in which the OEM and EMS employ very few people, and instead draw on experts for each new product or process on a contract basis. Imagine that instead of a fixed-workforce OEM working with a fixed-workforce EMS company, a very small core of employees at the OEM and at the EMS come together around a product and each choose the designers, product managers, supply- chain and manufacturing folks, and other experts who are the best in the world for that type of prod- uct. Overhead would be greatly reduced and access to flexible and motivated experts maximized.
Continued on next page
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