Mitigating the risks associated with Contract Electronic Manufacturing

Mitigating_EMS_outsourcing_riskOutsourcing your manufacturing to an Electronic Manufacturing Services (EMS) provider sounds fantastic doesn’t it? The potential benefits can be difficult to ignore: the opportunity to slash overheads, boost efficiencies, and to focus on the areas of your business that really matter. With much writing focusing on the benefits, I thought I'd balance the scales for you by sharing some of the drawbacks.

That’s right - for all of the rewards, there are a number of risks surrounding an outsourced strategy. In this post I’ll highlight some of these for you and explore ways you can mitigate them by working closely with an EMS partner.

You have to put your trust in someone else

One of the biggest causes of concern for OEMs is the potential loss of control. Letting go and putting trust in an external partner can be a challenge for some organisations. The transition from an in-house manufacturing environment to an outsourced solution will clearly lead to a number of changes, and day-to-day operating can be very different. For example, you’ll no longer be able to walk onto your shop floor and make a quick design change to your product before it ships out of the door. Nor can you decide to take an operator from one job to another.

However, by outsourcing you are able to be more focused on the result rather than the processes involved in getting there. It does though require trust and communication. You would need to clearly communicate your needs to the EMS company you’re working with, and be confident that they will deliver what you want, when you need it.

Trust is not something that can be bought or sold. Potential EMS providers must be able to demonstrate they have the capabilities, skills and agility to manage your business. From there, your trust is something to be granted them over a period of time, and only you can decide how long that will take.

You lose expertise and knowledge

Your production staff will have built up an in-depth knowledge of how your goods are produced. Living and breathing your products on a daily basis, it’s possible they will have implemented improvements to the build process, as a result of their expertise, which may or may not have been documented. During an outsourcing transition, it is very common to discover this ‘local knowledge’ on shop floors. Unless the OEMs staff are redeployed elsewhere, some of this skill and learning - and the resulting ‘tweaks’ – could be lost.

By way of mitigating this risk, good EMS providers are well used to unearthing these ‘undocumented processes’; if you make the decision to outsource, any further design changes and improvements will be documented by your partner. As a result, many OEMs don’t feel the need to record these details and instead rely on their EMS partners to do so for them. You can still retain a level of knowledge and understanding of how your products or machines are built within an outsourced strategy by having a mechanism agreed. Here, the EMS company’s engineers would provide a complete change control and ongoing documentation service, and the ability for you to access the latest build information for your products whenever you needed it.

You don’t know where your materials are coming from

In order to maximise the benefits of outsourcing it’s likely that you will not retain control of your supply chain (by free issuing the materials) and your EMS provider will utilise their preferred suppliers wherever possible. By removing yourself from 2nd tier suppliers, it could become more difficult for you to identify material-related issues, such as obsolescence, or cost saving opportunities.

If you are concerned about losing sight of where your materials are sourced from, you could work closely with your EMS partner and, where appropriate, jointly manage 2nd tier supplier relationships. The bulk of the supply chain management task would clearly be borne by the EMS company, as part of their role. But, for specialist or ‘strategic’ items you may decide to remain in the loop and retain an understanding of the key elements of the supply chain being used to support your products.

Whilst there are potential risks associated with outsourcing to an EMS provider, many can be mitigated by establishing an open working relationship. A lot will also depend on the levels of risk you associate with each of the above. Some organisations struggle to let go in certain areas whereas others are more than happy to relinquish tasks at the earliest possible opportunity!

Making the decision to outsource is clearly one that should not be rushed. Before selecting a suitable EMS partner there are a number of critical steps that you should consider.

Image by Phil Long

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Written by Neil Sharp

Neil has over 25 years’ experience in Electronics Manufacturing Services and Component Distribution. During his career, Neil has held a range of leadership positions in sales, marketing, and customer service. Neil is currently part of the ESCATEC Senior Management Team and is responsible for setting and delivering the overall Group Marketing strategy. Neil heads up the marketing department and is responsible for both the strategy and the implementation of innovative marketing campaigns designed to deliver high quality content to those seeking outsourcing solutions.