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Parts are placed on a printed circuit board assembly at an EMS provider.

years Digi‐Key has also been supplying parts to OEMs and EMS providers for small to medium‐size production runs.

Beeson notes that the EMS business is

evolving and many EMS companies provide design support for OEMs’ new products. Digi‐Key supports those design efforts and supplies parts once the design goes into production.

Many EMS companies have “global

sourcing strategies that incorporate Digi‐Key into their Asian operations or European operations,” he said. “Many of the European‐based contract manufacturers are starting to engage us a little beyond the catalog space. We are starting to get into some high‐mix, low‐volume supply chain support, said Beeson.

EMS is playing a bigger role in the

industry and “we know it is important to be close to the EMS community,” he said. EMS providers manufacture products for multiple OEMs, some of which are very large and global.

“So when Digi‐Key sells products to an

EMS provider, we are really touching a much greater ecosystem as a result of that EMS engagement. It's important that we engage EMS providers,” said Beeson.

Lindsley Ruth, executive vice president,

office of the president for Future Electronics, based in Montréal, said about half of the distributor’s business is with EMS providers and that percentage will rise over the next several years. He said five years ago about 30 percent of Future’s business was with EMS providers.

Future’s EMS business is growing because of consolidation and the fact

Similar requirements

In some ways the requirements that small and large EMS providers have of distribution are similar, said Ruth.

"EMS companies all have the same

basic needs. They want quality product, on‐time delivery and flexibility," according to Ruth.

He said smaller EMS companies rely

more on Future for engineering, design and component management, while large EMS rely on Future for security and continuity of supply.

“We differentiate ourselves there. As a

private company we hold four months worth of inventory for a customer around the world,” said Ruth. He added that Future “bonds a lot of inventory” for customers. “We are managing the fulfillment side of the business so production lines aren't shutting down," he said.

Ruth added that larger EMS customers

are more cost focused because margins are thin.

Smaller EMS companies tend to have

very small engineering departments that focus on designing fixtures or on design for manufacturability.

“A lot of smaller EMS guys may have

that more companies are outsourcing and “Future’s value proposition for EMS,” said Ruth.

Ruth noted that large EMS companies

purchase about 10 percent of their production requirements from distribution. "With tier 2 companies it's about 70 percent with tier 3 it's 90 to 95 percent," he said.

"EMS companies all have the all the same basic needs. They want quality product, on-time delivery and flexibility," said Lindsley Ruth, executive vice president, office of the president for Future Electronics.

approved vendor lists (AVLs) that are just descriptions,” and need help from distributors, he said.

Startups to drive demand

Ruth said that the EMS segment for Future will continue to grow in North America due in part to startups.

“There's a huge opportunity with

startups,” he said. A startup may have an idea for a product, but need help with the design and manufacturing of the product,” said Ruth.

The startup will likely use an EMS

provider to build the new product and distributors to supply the parts.

Distributors will likely be selling more

products to EMS providers in North America because some manufacturing is heading back to Mexico, the United States and Canada due to rising labor costs in Asia. In addition some EMS providers in China have a employee turnover of about 30 percent per month, said Ruth. There is less turnover in Mexico, he said.

In addition some OEMs may decide to

build new products closer to the markets where those products will be sold. So a product destined to be sold in U.S. will be more likely to be built by an EMS provider in North America.

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