For some electronic OEM equipment manufacturer executives with extended supply chains using contract EMS manufacturers, the primary concern is having enough adequate supply in the supply chain, not cost reductions. To companies like these, cash flow is not a concern.
Understanding an OEM decision makers MBOs (management by objectives) helps OEM manufacturers better align their EMS manufacturing supply chain capabilities with the same metrics the OEM executive’s performance is being measured against.
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How EMS manufacturing quote complexity impacts OEM Industry 4.0 decisions
Where cost is of primary concern for OEMs, the OEM’s extended EMS manufacturing supply chain may have more than one EMS partner participating. One benefit of this is the OEM can play the different EMS providers against one another during quarterly business reviews and price-quote negotiations of their OEM program fees with each EMS firm.
On the other hand, where continuity of supply and quality are primary concerns (drivers) tied to an OEM executive’s MBOs and measured performance, some OEMs will stick with one or several but, with one primary, EMS partners – while emphasizing a concerted focus on multiple locations for that particular EMS provider – and then leverage OEM program volume in hopes to offset unit costs (fees) charged by that EMS provider.
For the latter, the OEM is less focused on paying PPV. The primary objective is protecting supply and holding inventory.
To put this into perspective, lets look at the data center/cloud computing and equipment sector with players like HP, Dell, Microsoft, Inspur, Lenovo, Google, and Amazon (AWS) – to name a few – given the rising demand in cloud computing.
Some companies like Microsoft or Amazon may typically want 13 weeks of inventory in their hubs at all times. This clearly emphasizes the difference for a company like Amazon between managing manufacturing costs vs cost containment due to lost opportunity costs.
For Amazon, not having hardware equipment available to deploy is a bigger issue (cost) for the company than paying higher manufacturing supply chain fees to their EMS partners.
By comparison, firms like Dell and others are known to focus more on saving a penny.
In your search results, you can further target additional End Markets and/or Services, and/or additional Geographies.
What are your manufacturing MBOs? Do your MBOs align with your manufacturing supply cost objectives?
Learn more about manufacturing costs and pricing of EMS fees across various geographies, industries and hardware programs here.
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