The electronics contract manufacturing service contract is an important component of outsourcing when original equipment manufacturing (OEM) executives are tasked with outsourcing their design or manufacturing. (See, also: Fixed v. variable asset models)
The hardware manufacturing contract service level agreement is the most important document in the relationship between the electronics manufacturing services (EMS) provider and the OEM.
Not just an agreement between two parties, the service agreement provides the critical outline of the exchange between the vendor and customer. Sprinkled in are rules of engagement that detail the who, what, where, when and how much.
Formal contracts enable EMS providers to reassign the risk to the customer (OEM). Without a contract, the customer typically is not held liable for its forecast, so all purchasing and other spending made by the EMS provider is at its own risk and comes with limited rewards. The OEM, on the other hand, is interested in mitigating its supply chain exposure and risk. (SEE ALSO: How to drive cost out of your manufacturing product portfolio)
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