Using contract electronics manufacturers as a springboard for growth

Many original equipment manufacturers (OEMs) look to contract electronics manufacturers (CEMs) as a way of solving problems. They may be struggling for space, failing to deliver product on time, have ongoing quality issues or have difficulty controlling their costs.

Whatever the reason there is often a pain point that needs addressing; something hurts. 

Orders are flowing in, quality product is shipping out, and the customers appear to be happy? Are CEMs really only a solution for OEMs when things have gone wrong?

In this blog post, we challenge OEMs on what the positive effects of growth might look like and how the services of a CEM could help launch their business to dizzy new heights.

Don’t get me wrong. Outsourcing is a proven strategy for when issues within an OEM start to take a tight grip. Many companies have transformed their businesses by freeing up resources previously associated with manufacturing and then focussing on what they are great at. However, for some, this decision is reactive and rarely built into their strategic plans.

So if you are currently planning the next stages of growth, or looking to radically transform your service offering, here are four ways CEMs can act as a low-risk expansion springboard.

1. Physical space

What size and shape will your company premises look like in the future? Do you intend to hold finished products for next day shipment? What will this space look like if you introduce a new product range or enter another market? I’m guessing a combination of "much bigger" and "very different". Physical floor space and the logistics required to manage incoming raw materials, work in progress and finished goods stock can often be delimiting factors for OEMs experiencing high levels of growth.

Trying to predict exactly what space you will need in the future is very difficult, but outgrowing your existing premises before you have had time to react to new demand is even worse. When partnering with a CEM it’s important they can demonstrate to you how they plan to service your existing business as well as expansion options for the future.

2. Transportation

Will you continue to satisfy a "local" market or do you have plans to distribute further afield, say within Eastern Europe? How long are your customers prepared to wait to get their hands on the products you sell? Are the products you offer medium sized electronic "box build" devices or much larger electrical cabinets or electro-mechanical assemblies? How many of each can your existing transport provider safely deliver? How cost effective is your current arrangement and what will be the impact to your bottom line should you start supplying into another country?

Winning over new customers and securing orders from them can be hard enough but failing to deliver them on-time or meet service expectations can damage a company’s reputation. So if you have exciting growth plans to expand the distribution of your goods and services outside of the UK, partnering with a CEM that also has overseas manufacturing facilities, in close proximity to your customers, can help overcome some of these challenges.

3. Continued investment

Growth typically requires investment, but where is this investment best spent? How important are new product designers, engineers or sales and marketing staff to your sales strategy? Will your current equipment need upgrading anytime in the future to support those new design concepts you are working on?

Partnering with a CEM can be a cost effective way of gaining access to the resources, skills and equipment you need to support the levels of growth you aspire to. It will be their responsibility to ensure they have the right people with the right skills in the right place to assemble your products, and continually invest in training and personal development.

To remain competitive CEMs must continually review, purchase and upgrade the assembly equipment they have, along with any software used to control the production process. This will leave you free to focus on the areas of your business that support your growth plans - like design, sales and marketing.   

4. Insurance policy

Any business can encounter unforeseen challenges - the electronics manufacturing industry is certainly no exception. Updates to industry specific legislation, such as RoHS, REACH, WEEE or Conflict Minerals, need close monitoring. At the same time, the integrity of the incoming supply chain continues to come under threat from counterfeiting. Electronics manufacturers now, more than ever, need to make sure they have all the processes and equipment in place to stay one step ahead. Unfortunately, this extra work and effort are usually required just to stand still and very rarely help increase sales or leads to the design of a new and exciting product.

This is where CEMs can play a vital support role to OEMs looking to expand. They must remain at the forefront of legislation and compliance changes; it’s not something they can simply choose to do. They also have a responsibility to their customers to mitigate the risk of counterfeit parts entering the supply chain and finished products. This level of insurance - or perhaps reassurance - may not immediately translate to new product designs or increases on the order book. However, for many OEMs, demonstrating they have a robust supply chain behind them is often a box that new customers and markets will want to "tick" before engaging in any new business opportunities.

An executive guide to outsourcing your electronics manufacturing

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.