Executive Briefings

New Venture Outsource Survey Reveals Dynamics of OEM and EMS Provider Relationships

In recent years, original equipment managers (OEMs) in high-tech industries have forged solid links with electronics manufacturing services (EMS) providers. OEMs are keen to shed themselves of expensive assets, and have turned to the EMS sector to make both components and finished goods. But a new online industry survey by Venture Outsource challenges some of the assumptions that accompany such relationships. Despite the growing popularity of outsourcing, more than a third of OEM survey respondents still haven't turned over their manufacturing to outsiders. One possible explanation is the desire of OEMs to reduce "the amount of time it takes to introduce new products into the market." They might feel that the addition of an outside manufacturer or designer will slow that process. Nevertheless, a solid majority of OEMs surveyed are doing business with the top EMS providers, including Solectron, Flextronics, Celestica, Sanmina-SCI and Jabil Circuit.

For their part, EMS and original design manufacturing (ODM) companies say they understand their customers' market cycles and product technologies. But some OEM companies disagree with this claim, Venture Outsource says. There is also a slight disconnect with regard to the level of profit achieved by outsource providers. OEM respondents believe the percentage added to procurement services is higher than what the providers themselves say it is.

On the subject of long-term business goals, EMS and ODM companies say "finding new business opportunities" is their greatest challenge. They are also faced with the need to differentiate their services in an industry that is becoming increasingly crowded with players, and where OEMs are simultaneously demanding lower costs and higher service levels.

China isn't the only place where the outsourcing of manufacturing is happening. Both OEMs and EMS providers cite India as a good source of outsourced design services, while Mexico rates higher than India on the manufacturing side, Venture Outsource says.

Visit www.ventureoutsource.com.

In recent years, original equipment managers (OEMs) in high-tech industries have forged solid links with electronics manufacturing services (EMS) providers. OEMs are keen to shed themselves of expensive assets, and have turned to the EMS sector to make both components and finished goods. But a new online industry survey by Venture Outsource challenges some of the assumptions that accompany such relationships. Despite the growing popularity of outsourcing, more than a third of OEM survey respondents still haven't turned over their manufacturing to outsiders. One possible explanation is the desire of OEMs to reduce "the amount of time it takes to introduce new products into the market." They might feel that the addition of an outside manufacturer or designer will slow that process. Nevertheless, a solid majority of OEMs surveyed are doing business with the top EMS providers, including Solectron, Flextronics, Celestica, Sanmina-SCI and Jabil Circuit.

For their part, EMS and original design manufacturing (ODM) companies say they understand their customers' market cycles and product technologies. But some OEM companies disagree with this claim, Venture Outsource says. There is also a slight disconnect with regard to the level of profit achieved by outsource providers. OEM respondents believe the percentage added to procurement services is higher than what the providers themselves say it is.

On the subject of long-term business goals, EMS and ODM companies say "finding new business opportunities" is their greatest challenge. They are also faced with the need to differentiate their services in an industry that is becoming increasingly crowded with players, and where OEMs are simultaneously demanding lower costs and higher service levels.

China isn't the only place where the outsourcing of manufacturing is happening. Both OEMs and EMS providers cite India as a good source of outsourced design services, while Mexico rates higher than India on the manufacturing side, Venture Outsource says.

Visit www.ventureoutsource.com.