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www.us-tech.com
March, 2014 What’s Next for Outsourcing? By Philip Stoten (twitter: @philipstoten)
more demanding. Time to market is shrinking, market windows close faster, competitors catch up quicker and end users want the latest gadget custom built to their personal needs and delivered yesterday. All this while additional pressure from con- sumers and governments seem to want to dictate where and how you manufacture those products and even whom you partner with. Technology itself is also more
F
demanding, more complex, requiring more engineering, more develop- ment, more investment and even more regulation.
Embracing Responsibility Then there’s the added dimen-
sion of social and environmental re- sponsibility, making sure that your entire supply chain is doing the right thing by its employees, its local com- munity and indeed the planet. All this leads to a conundrum,
not just who and where to outsource to, but even whether to outsource in the first place. Clearly outsourcing is not a silver bullet, and it should nev- er be used to circumvent responsibil- ity in the supply chain, but it works well when applied well. The industry has grown to nearly $450 billion dol- lars, which wouldn’t have happened if the basic model were flawed. Thousands of contract manufactur- ers have, since the 1970s, made a
rom the OEM’s standpoint, the market seems to just get more and more complex, more global,
good living from providing customers who cannot or simply don’t want to make their own product with a sup- ply chain solution.
The premise is pretty simple re-
ally. As an OEM, you focus on your market and your product develop- ment. You allow someone else to do your manufacturing, along perhaps with some fulfillment, perhaps some
and more concerned about how their products are made. Surely social me- dia has taught us that these things will come out and they will have an impact of brand perception. Then there are national initia-
tives to bring jobs back. Initiatives like “Made in U.S.A.” encouraging manufacturing to be returned to the United States. Evidence is growing
If you’ve heard and used phrases like re-shoring, on-shoring or right-shoring or even
outsourcing 2.0, you’ll be aware the world of electronics manufacturing is changing and the only sure thing is that change is accelerating.
aftermarket services, and when needed, some design. If I am the new kid on the block with a great gadget funded by the venture capital fund- ing, why would I even think about manufacturing, recruiting, building factories, buying all that equipment, when someone else can just take my design, get it ready for manufactur- ing, scale it and fulfill it globally? So, the outsourcing model
makes sense, but it isn’t without its bumps in the road. Everyone will have seen the re-
ports that workers, particularly in China, are not treated well in some of these factories that produce the prod- ucts that we all covet. Does that damage the brand? Of course it does! Maybe not immediately but surely consumers will become more aware
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that consumers everywhere are con- cerned about manufacturing locations for a number of reasons. Governments also participate, supporting initiatives or adding tariffs to ensure some man- ufacturing occurs locally. This leaves the EMS companies
being pulled in many directions. The OEMs clearly want value, they want lower prices because when the EMS said it could leverage the supply chain, develop in low cost regions and fulfill globally they believed it. The consumers want a good product that comes to the market fast, deliv- ers on quality and reliability, and re- spects the people who make it. Somehow the EMS has to do this, while adding design and aftermarket services to an already complex offer- ing. Sometimes the service they re-
quire is more than just manufactur- ing; some OEMs require technical support from their outsourcing part- ner that might stray into the realms of ODM (Original Design Manufac- turer), requiring the EMS to actually develop, own and protect some of their own intellectual property or proprietary technology.
The Ultimate Partner So, what should the ultimate
outsourcing partner be? And per- haps equally important, what should they not be?
Ultimately an outsourcing part-
ner needs to be able to provide its customer with a manufacturing solu- tion that suits his or her needs. Ob- vious perhaps, but it’s not a one-size- fits-all solution. The future of outsourcing, I sus-
pect, is one that is less focused on manufacturing cost, low cost labor, or technology, but more on the abili- ty to design the perfect supply chain solution for each end every customer. What constitutes the prefect
supply chain is complex and I sus- pect most people on both sides of the argument rarely have time to consid- er what that might look like. A truly collaborative supply chain that really understands and aligns everyone’s needs is complex and requires some impressive development and honest discovery.
Identifying need is the first step. If the product is a restaurant
Continued on next page
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