Top line cost analysis of impact for assembly and component companies relocating their Asian supply chain capacity depends on, among other factors, percentage of capacity moved, program type, and whether relocation moves to an existing manufacturing hub.
This will result in increased dispersion of manufacturing, globally, and possibly leading to extending OEM company build and product launch cycles, and turns in inventory (inventory swings) for some OEM enterprises depending on EMS/ODM partner footprints, and EMS/ODM history of supplier and vendor management.
EMS/ODM providers have varying degrees of preferred supplier arrangements and covenant clauses with key suppliers. OEMs are not immune to passing on increased costs to end market customers. (Request key information on EMS/ODM companies here)
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Looking at China, specifically, OEMs directing their EMS/ODM partners to relocate factory production to alternative sites will likely hit top line earnings near-term, despite some lower manufacturing labor costs available elsewhere. (Read more on manufacturing labor costs in China v alternate locations in Asia here)
Duplicating capacity, at least temporarily, combined with supply chain set up and ramping costs will be key and can lead to impact on earnings, further emphasizing the importance of selecting capable EMS/ODM providers with strong histories of OEM customer programs management and productivity execution.
Vertical integration and less likelihood for EMS and ODM partner sub-contracting your activity programs to other, third-party, providers also plays a role. Below some rough estimates on EMS cost bucket comparisons in vertically integrated providers.
What’s an OEM?
Read our article, The differences between OEM companies and CM, CEM, EMS, ODM and JDM electronics providers for more information. And if you are unable to find answers to your questions please contact us and we will respond to you promptly. Meanwhile, to save you time, contract electronics solutions providers: CM, CEM, ECM, EMS, ODM, JDM, design house definitions and classification, are below.
CMs and electronics design houses
Electronics solutions providers are called, although less often, CMs, or contract manufacturers. Their work in electronics is assumed but omitted. Contract electronics solutions providers focusing on R&D services, like embedded systems design, are called design houses. Electronics design is highly profitable and a highly competitive service offering because paces at which new product introductions (NPI) come to market become faster as companies try to increase value to maintain relevance and competitiveness.
In your search results you can further target other Industries and/or Services plus, you can add more geographies to your search.
Its common for any of the other types of contract electronics solutions business models (EMS, CEM, ECM, ODM, CM…) to include electronics design in their service offering, although doing so does require additional insurance, liability and certification requirements are met.
CM – contract manufacturer
Contract manufacturers (CM) will offer manufacturing services, and often some limited services related to manufacturing, to OEM customers. They’re called CM or contract manufacturer. These are both common terms in any manufacturing sector where production manufacturing is outsource and is used in the electronics industry, but also in other industries such as pharmaceuticals, construction, food and other consumer packaged goods, and so on.
CEM – contract electronics manufacturer
Unlike CM, contract electronics manufacturers (CEM) distinguish themselves from contract manufacturers that produce foods, paperback books, etc… due to the fact they serve the electronics industry. CEM is always interchangeable with CM, but CM is not always interchangeable with CEM.
ECM – electronics contract manufacturer
Electronics contract manufacturer (ECM) is just another acronym for CEM. ECM is always interchangeable with CM, but CM is not always interchangeable with ECM. Again, whether or not the contract manufacturer offers electronics solutions is the differentiator.
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EMS – electronics manufacturing services
Electronics manufacturing services providers are also revered to an EMS providers, EMS manufacturing, EMS companies… The EMS provider business model has evolved over the years beyond offering just core manufacturing services.
ODM – original design manufacturer
Original design manufacturer (ODM). Until about 2005, this terms used to apply to companies in Taiwan, only. Now ODM providers and services can be found nearly everywhere EMS providers are located. ODM white label v ODM private label: ODM manufacturing can be broken down into white label and private label.
In your search results, you will be able to further target provider options by choosing End Markets, then selecting Go.
ODM white label is where the ODM designs, manufactures, distributes non-label, generic FGI products to various outlets or retailers. These retailers then sell the ODM product under their own logo or brand name. ODM private labeling is where the ODM sells FGI products produced exclusively for a particular retailer.
Readers can purchase an itemized, audit checklist for evaluating technical and management capabilities of electronics CM, CEM, ECM, EMS providers here.
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