What’s the SCOOP – Thought for the C-Suite #2 of 8 – Partnership Prevail
By Philip Spagnoli Stoten Founder of SCOOP
Relationships can be hard, especially when there are external pressures. The relationship between OEM and EMS has been more under pressure than ever recently. Any relationship which consists of one party continuously telling the other that they are unable to meet their obligations is going to have challenges and will ultimately end up under stress.
In the last twelve months or so, many EMS companies have been on the phone regularly to their customers with bad news, mostly as a result of shortages in the supply chain. Many of the conversations related to delivery have been around one or two key missing components which means that the EMS cannot deliver on the scheduled date. What is more, the date they are now expecting those parts is less reliable than it has been, so even that is precarious.
Conversations around extended component lead times that are pushing schedules out by many months are becoming more commonplace. As are conversations around additional component costs due to the need to purchase those key components through other sources.
The temptation for the brand or OEM is to say this is not our problem, we contracted with you to provide a complete product and the parts of the bill of materials are your responsibility. But the truth is this isn’t a failure on the part of the EMS, it’s a failure of the supply chain, caused by the massive disruption of the pandemic, increased demand, supply chain uncertainty and logistics issues.
The right solution is to look at the relationship as a partnership and for both parties to work together to find the best solution. That solution might be a redesign with parts that are available. It might be an adjustment in build schedule to bring forward products that are build-ready and schedule out those that are missing parts. The right solution, as in any relationship, is also open, honest and prompt communications. All in all, it is those OEM and EMS companies that view their relationship as a partnership, and not in an adversarial manner, that will achieve the best outcome.
To my mind this is just the tip of the partnership iceberg, the part that is fixing the current problem. The truth is that a relationship where one party constantly tries to get the lowest price from the other without consideration of their business model makes little to no sense, and is certainly not sustainable. Sustainable relationships come when the brand or OEM sees that EMS as a real partner who is taking responsibility for their manufacturing and their supply chain.
These partnerships are deeply embedded in both parties’ business models and benefit hugely from their complementary skills. OEMs focus on product ideation and sales and marketing of their solutions. Meanwhile their manufacturing partner concentrates on building the right manufacturing and supply chain footprint, making sure the product is designed for manufacturability, ensuring the product meets the demands of the consumer, and even caring for the reverse logistics and end of the products life.
These are integrated partners, deriving value through their own skill sets, both relying on each other. They are matched culturally, sharing the same goals in terms of the environmental and social impact as well as supply chain security. As partners they reflect well upon each other and tell a consistent story, protecting and promoting each other’s brands!
These are the partnerships of the future that are agile and robust enough for the next disruption, whatever that might be. These are the partnerships that prevail, that thrive, that last for decades through the ups and down and are fit for the future of the outsourced manufacturing industry.
