How is the OEM/EMS partnership evolving in electronics manufacturing?
By Neil Sharp, JJS Manufacturing
First published on JJS Manufacturing blog
The UK EMS Industry 2016 – 2022 report provides some telling insights into the current state of the electronics manufacturing industry, combining its own original research with a selection of extracted data.
According to the report, many UK Original Equipment Manufacturers (OEMs) are choosing to hand over more of their ancillary services to their Electronics Manufacturing Services (EMS) provider – whether it’s relinquishing responsibility for their supply chain, shipping logistics, post-sale customer service, repairs or end of life.
For the OEM it’s a means of ensuring that they continue to consistently deliver high quality products in a timely way.
And for the EMS provider, this added level of responsibility relies on having an increasingly agile, holistic, end-to-end approach to the process of electronics manufacturing.
In this blog post we dig down into what the UK EMS Industry report reveals about the evolving relationship between OEMs and their EMS partners.
Earlier collaboration is key
Traditionally it has been the role of the OEM to set the design rules in terms of which components or materials are used by their contract manufacturer. The EMS partner then simply assembles the product according to these specifications.
But with electronic component shortages remaining a continuing challenge, it makes sense for OEMs to involve their manufacturing partners at the earliest possible opportunity.
And in an environment where time to market is crucial, there is a marked shift towards earlier design cooperation between the OEM and their EMS provider.
The end result for the OEM? Faster product development, more efficient New Product Introduction (NPI), better product performance, and in many cases lower production costs.
A shift back to UK-based production
The last decade has seen a trend towards outsourcing manufacturing to lower-cost offshore locations, most frequently to the Far East and more recently to CEE/MENA facilities.
However over the last couple of years there’s also been a move to ‘re-shore’ production back to the UK, as manufacturers look to retain the intellectual property of certain designs and to regain greater control of product quality.
More local operations also remove the inconvenience of ‘management from a distance’, as well as helping to reduce supply chain issues, speeding up shipping times and enabling tighter control of new product designs.
As electronic assemblies become more complex there’s also a greater reliance on a mix of technologies and on high reliability performance criteria which demand very specific skill sets.
The prediction from the UK EMS Industry Report is that more of these types of high-complexity assemblies are likely to remain in the UK, if not for the the product’s entire life-cycle then at least in the early stages of the product’s life until the skill sets in lower-cost plants are brought up to speed.
There’s a greater focus on the ‘total cost of supply’
Achieving a competitive price is still a priority for OEMs.
But while the dominant cost-model in the OEM-EMS partnership has traditionally been one based on unit price, there’s also a growing appreciation of the significance of ‘total cost of supply’ or the ‘total cost of ownership’ – where all associated costs (from product ordering to final delivery) are taken into account.
Looking for efficiencies early on the design process is also proving to be key in terms of OEMs achieving faster time to market, better product quality and a lower end price.
As EMS providers get closer to supporting with design elements and manufacture more complex and diverse product ranges, their level of expertise continues to evolve and grow.
The UK EMS Industry Report highlights the fact that the relationship between the OEM and their EMS provider is one that is maturing, with the role of many EMS providers shifting from one of a ‘sub-contractor’ to that of ‘manufacturing expert’.
