Supplier flexibility: an OEM’s secret weapon in raising profitability?

supplier-flexibilityWhen an OEM sets off to select an electronics manufacturing services (EMS) provider, the focus is often on price as a way of increasing their margins.

But there is one competency that is often over looked when it comes to prioritising partners - supplier flexibility.

How your EMS partner responds to change can have a dramatic effect on the success of your business. After all, your profitability hinges on producing and delivering what your customers want, when they want it - and your suppliers are at the heart of this process.

So, could supplier flexibility be a secret weapon when it comes to maintaining profitability in manufacturing?

Here are five reasons why it may well be.

1. Product creation and lifecycle management

There is a growing trend for EMS providers to take on more responsibility throughout the product lifecycle and at both ends of the supply chain. One example of this is in support of innovation and design.

Involving your supplier from the outset will mean they have a deeper understanding about your business requirements and objectives, which will enable them to take a more proactive and flexible approach.

For example, they may identify future product opportunities, which they can subsequently prepare for on your behalf well in advance. Or they may suggest design modifications, component or material substitutions, or alternative processes and logistical flows that will improve the functionality, cost and/or manufacturability of your current product.

This method of working could be fundamental in helping you ward off competition, and turning around new products or variations in a more timely and profitable manner.

2. Components

Component suppliers closing down and product lines being discontinued are a fact of life in manufacturing. Therefore, a good EMS supplier should always stay ahead of the game when it comes to managing your supply chain and sourcing what you need.

In the event that your material supply does break down, your supplier should be sufficiently flexible and prepared to suggest alternative parts promptly - to ensure that production remains on track and costly delays are avoided.

3. Volume

Whether you need to increase production to meet certain seasonal increases in demand, or you want to include a number of product variations to meet specific geographical or market segments, responsiveness and flexibility when it comes to volume availability are fundamental in order to maintain your profit margins.

The "UK EMS Industry 2013-2018" report produced by Reed Electronics Research states: "Flexibility in manufacturing at an EMS is critical to adjust volume production, or the assimilation of necessary product variations, as the OEM seeks to maximise their own customer and market requirements."

As such, your EMS partner should have the agility to be able to swiftly and efficiently change their manufacturing priorities, in order to adjust to your demand variations - for instance, they should have the ability to dynamically "flex" their manufacturing resources accordingly.

In addition, when EMS companies work closely with their OEM customers to really understand their business and the requirements of their customers, alternative manufacturing processes can be implemented - such as postponement manufacturing, where extremely agile configure-to-order (CTO) systems can be put in place to enable fast response to the demands of the OEM’s customers.

4. Delivery and distribution

Imagine your marketing department has identified a new, lucrative geographical region for your product: the faster you can get the goods there the better. At this point, your EMS will need the processes in place to arrange shipping at short notice.

Can your EMS provide the distribution coverage you need? Logistical flexibility is critical for quickly getting high-demand goods to their destinations, so you don't have to worry about losing out on valuable sales.

Equally as important is your EMS partner's ability to tailor shipping to your needs, in order to help keep your costs to a minimum.

5. External forces

Supply chain management is becoming increasingly complicated. Global shifts in demand patterns; a changing competitive landscape; natural disasters due to environmental change; regional legislation; political unrest, industrial action at ports: these are just some of the macro-forces OEMs and their supply chains have to prepare for and contend with.

Can you be confident your EMS has the flexibility and know-how to deal with these situations as they occur? And not only that, but are you reassured their own suppliers and partners are adaptable enough to meet the constant challenges and changes manufacturing has grown to accept in recent years?

Their ability to respond could mean the difference between “business as usual” and production grounding to an expensive halt.

A value-added revelation

Flexibility is intrinsically linked to timely and high-quality production. When even minimal down-time can be catastrophic to a manufacturer, it's easy to see how a responsive EMS supplier can mean the difference between success and failure for an OEM.

With that in mind, it may well be time that flexibility was recognised as a key asset and value-added component among EMS suppliers - and revealed as the secret weapon in manufacturing.


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Written by John Mayes

John is a business consultant with an extensive career spanning over 30 years. During this time Chris has set up, led, and acquired highly successful component distribution and EMS companies including Paragon Electronics and JJS Manufacturing.