While outsourcing manufacturing is not a new concept, contract electronics manufacturing gained significant traction in the mid-1990s, offering greater value than the traditional vertical manufacturing strategies (Accenture). Many OEMs realized that by outsourcing manufacturing and some, if not all, of their supply chain activities, they could be free to focus on core competencies and planning processes. “Contract manufacturers have proven over time that they are able to produce at equivalent or even higher quality levels when compared to OEMS” (Carbone).
Supply Chain Management
The actual manufacturing of electronic components is only one aspect of outsourcing. Electronics products often incorporate new and emerging technologies, requiring higher levels of sourcing expertise and qualifications. Global sourcing carries an increased risk of disruption. Faced with these challenges, brand owners are increasingly turning to contract manufacturers for supply chain and inventory management as well as manufacturing needs.
Leading CEMs such as EBW Electronics strive to offer a wide range of supply chain management services. A well-integrated supply chain leverages supplier expertise, capabilities and technology to help reduce costs and improve productivity. Supply chains are typically categorized as lean or agile. Lean is reserved for predictable, non-volatile demand, where costs are risks are lower. Agile supply chains focus on speed to market, maintaining an on-demand inventory and the ability to quickly and efficiently respond to market changes.
The goal of supply chain management is simple: to ensure the highest delivered value with minimal waste.
Role as a Distributor and Buyer
Investing in a supplier network is critical to a more efficient overall supply chain. EBWE supply chain management assures ongoing dialogue between the contracting firm and its suppliers. A good relationship between contract manufacturer and brand owner is one that attempts to reduce all forms of waste and evaluates the cost-to-serve.
EBWE can demonstrate diversity and legacy in its supplier relationships, with proven sourcing of best-qualified suppliers for specific project requirements. Is it best to purchase from one supplier or multiple? Is demand forecasted as predictable or volatile? Our network of suppliers is extensive, featuring multiple resources for the same service. This allows us to leverage purchasing power based on higher volumes than OEMs.
While price is a significant part of outsourcing electronics manufacturing, this isn’t the main focus of the supplier and contracting firm’s relationship. In order for the partnership to work well, service needs to be the ultimate goal. This will encourage more advanced procurement planning and scheduling and better inventory management in the supply chain.
Turnkey Project Management
Projects carry the risk of long-lead times for components, but these risks can be mitigated by constantly evaluation the market and communication with suppliers. Suppliers who receive weekly forecasts—such as those who work with EBWE—are able to plan and confirm that the needed materials will be ready in time.
A dedicated EBWE Master Scheduler is responsible for the daily scheduling of materials and plant operations necessary to produce the required quantity of a customer’s product. This helps the supply chain run more efficiently by providing a clear product status each step of the way.
A Just-In-Time Supply Chain
Contract electronics manufacturing supply chains that work well are the ones that are set up to assemble, sequence and deliver just-in-time or JIT orders. JIT sets out to lower costs in the supply chain by reducing waste. QAD (2004) says that longer lead times require higher inventory buffer levels. When sped up, lead times can significantly reduce inventory levels.
Kanban signals also help encourage supply chain visibility by making replenishment information more visible, reducing information lead-time, and getting rid of waste in the flow of materials (QAD, 2004).
Transparency and Risk
Supply chain visibility is critical from start to finish, as multiple suppliers are usually involved in the process. A supply chain can quickly become too large and too complicated to be efficient and effective. EBWE works to resolve this potential issue by evaluating new suppliers and closely managing existing suppliers.
A supply chain must also be resilient against external risks, both natural and manmade (Long). In a survey by Supply & Demand Chain Executive, they found that 65 percent of respondents believe the financial impact of supply chain disruptions is increasing. Resilient supply chains critically examine their operating environment and interdependencies.
“Supply Chain Metrics That Matter: A Focus on Contract Manufacturing”; Mayer, Abby, Supply Chain Insights LLC, 2013. http://supplychaininsights.com/wp-content/uploads/2013/08/Supply_Chain_Metrics_That_Matter-A_Focus_on_Contract_Manufacturing-13_AUG_2013.pdf
“Strategic Outsourcing: Electronics Manufacturing Transformation in Changing Business Climates”, Delattre, Al; Hess, Tom; Chieh, Ken. Accenture. 2003. http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan015115.pdf
“Successful Risk Management in the Electronics Supply Chain,” QAD, 2004. http://www.qad.com/Public/Documents/rm_electronics_supply_chain.pdf
“Managing Your Supply Chain,” Glavinich, Thomas E., 2002. http://www.ecmag.com/section/your-business/managing-your-supply-chain
“Sustaining shareholder value by hardening the enterprise against external risks.” Long, Jr. Gene, IHS.