Contract Manufacturing


Local presence, global reach


With the right partnerships, industrial control, instrumentation and electronics manufacturers can transform globalisation from a threat to an opportunity as Steve Marshall, managing director, at Offshore Electronics explains


G


lobalisation is a double-edged sword. On one side, fast-growing global markets open up new sales opportunities for manufacturers of specialised electronic products. On the other, companies that have spent years building a strong reputation and robust customer relationships are seeing their hard work threatened by the arrival of new competitors from overseas. Increasingly, however, specialist manufacturers are finding ways to maximise the benefits of global markets while minimising the downsides. One way this can be done is through the use of contract electronics manufacturing (CEM) specialists. The CEM industry is, in many ways, a


by-product of the rapid growth of industrial capacity in emerging markets. Decades of investment by electronic equipment OEMs left many emerging market players with production capacity – and expertise – that became surplus to requirements as technologies and the demands of their core markets changed. The availability of manufacturing capacity and skills led to the evolution and growth of the contract electronics manufacturing sector, which now dominates the production of electronic assemblies and systems. The search for new uses for this capacity encourages these companies to offer specialised outsourced


manufacturing services, resulting in a new kind of value chain. Today, CEM services have reached new heights of sophistication – and accessibility. In part, that’s because electronics manufacturing requires it. Components are miniaturised and complex and the production process machinery they require is extensive and expensive. Factor in the added burden of quality control, regulation and compliance and modern subcontracting involves far more than simply renting out some spare machine capacity. Today, it is very much recognised as a specialist task.


But the sector has also grown for straightforward commercial reasons: it makes simple economic sense, especially in an environment where managing manufacturing capacity is becoming ever more difficult, thanks to fast-evolving product lines, larger product portfolios and volatile customer demand. With the support of a CEM, companies now have the opportunity to outsource the production of part, or all, of a product’s electronics – often alongside the electromechanical and enclosure components – to an external partner. This business model is hugely powerful for companies operating in specialist sectors and niche industries. It allows them to retain full control of the aspects of their


business that differentiate them in the market: deep domain expertise, product design and development, marketing and customer support, for example. At the same time, the manufacturing of parts and process control, which are not usually viewed as core activities, are managed by partners with specialist experience, scale and knowledge in this arena. Besides reliable access to certified


products that meet the standards demanded by the wider market, CEM offers companies a number of other benefits. For example, outsourcing can result in significant cost savings through economies of scale. When working with an experienced CEM provider that has a range of customers, purchasing is optimised and volume orders of common components are better priced. The cost of production can also be


reduced further when working with a specialist firm that has a wealth of engineering knowledge. The leading CEM providers work with their customers to deliver proven design advice on optimising parts and products, to ensure they are manufactured in only the most efficient way, using approved processes. This also leads to a substantial improvement in overall product quality and a reduction in waste during the manufacturing and testing stages. Equally, the leading CEM specialists will use only the latest and most sophisticated production technologies and systems; these often require considerable investment and can be so specialised that they are rarely viable for an electronics design or production company to install in- house. For instance, Offshore Electronics recently expanded its electronics production capabilities still further, adding


a third new surface mount line, capable of up to 56,000 placements per hour; supporting investment has also been made in the latest generation digital screen printer, precision placement machines and reflow soldering equipment. This level of investment is beyond – or simply inappropriate – for most OEMs or electronic product companies.


It is important to point out, though, that achieving all the benefits of adopting an outsourcing model can only be realised when partnering with the right CEM supplier for the business in question. For example, small product manufacturers will need to find a contract electronics company that can handle smaller volumes and still be a good ‘fit’ commercially providing the same level of expertise and customer service expected by larger volume OEMs. There also needs to be an excellent level of customer support, as outsourcing can sometimes feel like a giant leap for manufacturers, especially smaller organisations. Some are even fearful of losing their intellectual property, or having design concepts stolen, so it is vital that trust is at the centre of the partnership from the very beginning.


As globalisation continues to dominate the manufacturing agenda, the rise of CEMs could not have come at a better time. Instead of leaving SMEs prey to the forces of the global marketplace, where they could become overwhelmed by larger firms, outsourcing gives smaller operations access to the same tools enjoyed by their bigger counterparts so that they can continue to be strong and profitable players in the international field.


www.offshore-electronics.co.uk


www.cieonline.co.uk


Components in Electronics


October 2018 23


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