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EMS


Jabil sees growth in North America equipment production


J a “Risk is probably top of mind for all of


our customers,” said Don Hnatyshin, chief procurement officer at Jabil, based in St. Petersburg, Fla. “It is one of the highest values and differentiators that Jabil can bring to the customer base.”


He noted that Jabil’s customer


portfolio includes the top three OEM leaders in just about every industry in the electronics equipment world. “They are market leaders and they are very demanding. They expect Jabil to have the ability to mitigate risk, so we've invested heavily over the last five to 10 years on this," he said.


To reduce risk for customers,


managing supply chain risk is crucial, so Jabil supplier managers work closely with key suppliers to reduce it.


Scrutinizing suppliers for risk


Jabil scrutinizes and evaluates suppliers’ capabilities that impact risk. For instance, risk for Jabil and its OEM customers increases if a supplier cannot support an unexpected increase in demand for an OEM’s customer’s product or lacks the technology that an OEM needs for a new product. “Jabil looks closely at the technologies that suppliers are developing as well as their manufacturing capabilities and how well they communicate with Jabil about supply and demand issues”, said Hnatyshin.


Jabil supplier managers also make


sure that there are ‘redundancies’ in the supply base to reduce risk, said Hnatyshin. Redundancies are necessary


Jabil has facilities in 12 North American cities including this one in San Jose, Calif


manufacturing locations in different parts of the world for the same part. So if an earthquake strikes a certain region, knocking out production of a part, the supplier has another manufacturing location for it so continuity of supply is assured. In some cases that means having the tooling and processes already established so that production can be quickly redirected,” he said.


Jabil also looks to distributors to help


manage and reduce risk. “Distributors are important part of our supply chain ecosystem,” said Hnatytshin. “We have relationships with all of the franchised


to maintain continuity of supply in the event of a natural disaster or other event that could disrupt production of crucial components.


“An example of redundancy is having


multiple suppliers for the same part”, said Hnatyshin. “But it also includes a single supplier having multiple


Bill Muir of Jabil Circuits expects the company’s North American business to grow over the next five years as more electronics equipment, which in the past would have been built in China, is produced in United States, Mexico or Canada. He also believes that there will be North American EMS growth in industries that have some level of regulatory requirements and where high quality is important. Such industries, he says, would include defense and aerospace, medical and automotive. Many companies in those industries don't use EMS providers much, but more will adopt an outsourcing strategy over the next five years.


“A handful of years ago, China was just about the best place to build just about anything, because of very low labor rates”, said Muir. “But in recent years, wages in China have increased dramatically and there has been an increase in logistics cost as well. With certain products, it is more cost effective to build products in North America rather than Asia,” he said.


Tom Dinges, senior principal analyst for researcher IHS, says that many electronics companies are rethinking their manufacturing strategy and Asia. “While wages in China are rising, the bigger issue is that if your primary market is North America or Europe and all of your production is in China when there is a production issue somebody is going to get a call at midnight or one in the morning. When a product is being built half the world away and there is an issue, it's harder to know what to do to solve the problem”, he said.


Dinges said EMS revenue in the Americas over the next five years will grow 2 per cent per year for the next five years. North America accounts for about 90 per cent of EMS revenue in the Americas. While 2 per cent growth may seem modest, the global EMS market will increase by only 0.4 per cent per year for the next five years, according to Dinges.


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While North American EMS sales will grow at faster rates than global EMS revenue, Jabil will not need to invest heavily in North America because it already has a lot of manufacturing capacity in place to meet an increase in demand. “We have an exceptionally well-developed footprint in Mexico and a diverse footprint across North America,” Muir said. "Over the next two or three years, I don't think there is a need for a massive investment in North America."


www.jabil.com


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