CONTRACT MANUFACTURING FEATURE


Coming back home: Reshoring in the electronics sector


Covid-19 has exposed fragilities in global supply chains – leading many manufacturers to assess the need to bring manufacturing closer to home. Steve Marshall, managing director at Offshore Electronics, explains further


D


ifferent times call for different measures. Historically, the need to


reduce costs led manufacturers to transfer production to lower-cost economies. To a large extent, that approach is still in place. However, emerging factors such as trade tariffs and Covid-19 have led companies to review their policies – and consider the benefits of reshoring. Reshoring – or bringing production


back closer to home – is gaining traction in the face of current trading conditions. Tariff disputes (such as between the US and China), geopolitical uncertainty (including ongoing Brexit negotiations), extreme weather and the emergence of Covid-19 are all playing havoc with global supply chains. According to Piergiuseppe Fortunato,


economic affairs officer at the United Nations Conference on Trade and Development (UNCTAD), “Automation and reshoring allow for more flexible adjustment to changing demand. Most analysts concur that the current pandemic will reinforce relocation and reshoring.” UNCTAD estimates a reduction in


foreign direct investment of 30-40% during 2020 and 2021. Industries such as electronics will be at


the forefront of efforts to make these kinds of changes. It has been one of the main beneficiaries of offshoring but will need to adapt to new conditions and embrace reshoring. However, the global supply chain in


electronics is not going to disappear. In fact, banking giant ING says that electronics manufacture has increased its reliance on complex value chains in recent years – compared to industries such as automotive and textiles. “Specialisation in electronics value


chains makes it difficult for firms to diversify their suppliers across countries to increase supply chain resilience,” it says. One way of remaining within these


extended supply chains – while not having to deal with their complexity – is to use a local contract electronics


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Figure. 1: The latssor


theirs – and how well they understand your needs. Finally, see how they operate – such as


by starting with a small job. Their skill, expertise and passion as engineers should leap out. For example: can they help optimise your board designs, test for reliability, cut your costs and take on procurement and other processes? Offshore Electronics conducted a


research project to understand why customers outsource to a CEM. We found four main reasons. First, while many customers were


manufacturing (CEM) partner. A CEM can carry out a range of subcontracting work – from assembly to testing – on state- of-the-art equipment, as well as sourcing components competitively. Crucially, it will maintain the necessary links with global supply chains – but will effectively act as a local manufacturing partner for OEMs.


FINDING A PARTNER When shortlisting CEMs, choose only reputable, well-established companies. Prioritise those with ISO-approved facilities that works to IPC 610 Class 3 – the highest in electronics assembly. Secondly, assess their capabilities


through an online search or – ideally – a visit to their manufacturing operations. Do they have the expertise and the resources to meet your needs? They need relevant experience, appropriate equipment and sufficient volume to achieve economies of scale in purchasing and manufacturing. Thirdly, get to know them. Initial


discussions give a good sense of whether your values and philosophies match


expert in design, for instance, electronics manufacturing was not a core skill. Second, a CEM gave them access to specialised skills and knowledge, such as the latest production machinery. Third, designs could quickly be turned into high-volume production – giving them faster speed to market. And fourth, investing in specialist staff and equipment did not make economic sense. Outsourcing manufacturing gave OEMs


access to advanced technology and experienced staff while maintaining optimum manufacturing flexibility. While the electronics industry as a


whole will continue to rely on global supply chains, individual manufacturers – especially SMEs – must try to reduce their exposure to the associated risk. One way of doing this is by reshoring. A partnership with a regionally based


CEM is a sensible reshoring option. It means that final delivery of a product is not subject to long delays – from a distant region – and complications such as procurement and testing can be subcontracted to the CEM. Having a sub- contractor close to home also allows an OEM to carry out greater scrutiny of a CEM’s facilities, capabilities and company. Global electronics supply chains will


continue to dominate production. However, by using a reputable, locally based CEM, OEMs can maintain their links to these networks while reducing some of the associated risks.


Offshore Electronics www.offshore-electronics.co.uk


ELECTRONICS | NOVEMBER 2020 25


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