EMS Providers might hire manufacturing reps to help the provider market and sell specific, technical services and / or product offerings when the provider’s current sales force does not have bandwidth or expertise (depth or scope). In such situations, good reps properly positioned can hit the ground running. This can be good.
There is little differentiation in core service offerings / capabilities among most electronics manufacturing services (EMS) providers today serving the same market or industry – other than geography and, the resulting influence, therein – sans comparing vertically integrated providers with providers not vertically integrated. This is true, even among EMS providers serving non-traditional markets such as aerospace and avionics; defense and military electronics, industrial, medical and automotive electronics. Distinct differentiation between providers serving traditional markets compared to those serving non-traditional markets comes down to quality certifications.
Many feel real differentiation lies in how a provider executes and how or whether an EMS provider enhances your supply chain so that your company is more competitive.
EMS differentiation has been an ongoing struggle for providers and the industry is becoming increasingly more competitive. So because of this, some EMS providers feel that by hiring manufacturing reps the provider can extend the reach of their current sales force which will translate to more business opportunities. Perhaps like casting additional fishing lines into a vast ocean.
In your search results, you will be able to further target provider options by choosing 'End Markets', then selecting Go.
“Who brings the money to the table – the provider or the OEM buyer? All money comes from buyers. No buyer, no money.”
Below are nine (9) things to think about regarding business arrangements (real or perceived) between EMS manufacturing reps and providers wanting to grow revenues, and interactions between the provider and the rep and the buyer.
1. Manufacturing representatives are no different than real estate agents trying to sell you a house. Real estate agents representing the seller are motivated to sell you a house at the highest price possible because their commission is based on sales price. Real estate agents will tell you they get paid by the seller, but it’s the buyer’s (your) money the agent ultimately gets paid with from the seller.
Manufacturing reps are motivated in the same manner trying to convince you the provider’s services being offered are what you need and the asking price is fair. If a rep cannot convince you to buy, a rep doesn’t get paid. So, how can reps act in your best interest? There are a unlimited number of providers wanting to extend their sales reach and the rep can always lower their fee / commission or rep the provider(s) on a contingency basis to win over a provider, so know a rep is more motivated by money than job security because there will always be more provider prospects wanting to speak with or hire the rep if a rep loses an EMS account.
2. The manufacturing representative’s network of colleagues or Linkedin community may tell you you can trust the manufacturing rep because, “…[inser rep name] has worked in the industry for 20 years.” But, with shorter and shorter product life cycles in the tech sector, and electronics companies constantly re-testing strategy, re-sizing or transitioning their staffing needs to better manage costs in an increasingly competitive global marketplace, their friends could just be paying lip service so they can call-in favors from the rep later should they find themselves downsized — because ‘that’ rep is the one with 500+ contacts or Facebook friends.
SEE ALSO
How to know whether you get best component pricing
Electronics bill-of-materials management
3. Know you could be set up purchasing EMS or ODM services from an agent serving multiple masters that pay the rep only if the rep sells you their services. Providers’ agents may only get paid only if you purchase (no matter how bad the deal is), which is the exact opposite of the buyer’s (your) best interest.
Manufacturing representatives claim the provider pays their commission, but the rep fails to mention the provider gets that money from you (the buyer). Think of it this way: who brings the money to the table – the provider or the OEM buyer? All money comes from buyers. No buyer, no money.
Reps get paid amounts of money relative to the amount of business they sell you. The larger the business (more money) reps convinces you to buy from the provider, the larger the dollar value of the rep’s commission.
4. Reps might also tell you they get paid a monthly stipend from ODM or EMS providers whether, or not, the rep brings in business. No provider can continue this type of business relationship with reps, indefinitely. The rep either has to close a piece of business at some point in the future, or the provider drops the rep. Now, do you see the conflict? Reps have to sell you services from one of the ODM or EMS providers the rep represents, or the rep loses the account.
5. EMS providers have to make money. Break-even is not sustainable so, providers also need to turn a profit to remain in business. But, you don’t have to go with a bad choice just because you know, or like, a rep (or staff sales person). The manufacturing representative model can be like a club where business is conducted based on who-knows-who and being built on previous relationships. It is not always driven objectively by technical capabilities, or professional competency or merit.
In your search results, you will be able to further target provider options by choosing 'End Markets', then selecting Go.
Why do think former EMS sales executives often get placed as CEOs within some EMS providers? Because it’s the sales function that has the OEM customer relationships and they can bring those contacts to the table. But, that’s sometimes the only thing these folks can do in these situations and this too can be a short game because more times than not the sales-based CEO will be replaced by a CEO with a background in engineering, finance or operations once the business has traction. Critical sense views the long arc.
Human nature makes it easy for us to often avoid the difficult analysis. Just as water travels the path of least resistance, many people tend to make decisions based more on familiarity and emotions. This can translate to choosing a provider because of a ‘relationship’ and not because the provider is actually qualified to manage your OEM program. (See, also: How to select an EMS partner)
6. Representative business models may not be as transparent as they appear. Intentions by reps can be covert at best and disingenuous at worst. Many former EMS sales people start manufacturing rep firms. This can be a smart move. Since it’s in the manufacturing rep’s best interest to sell you provider services from a contract electronics provider the rep represents to you, and the rep’s payday is proportional to the size of the sale. The rep is motivated to sell you as many services as possible. Caveat emptor.
7. How can OEM buyers trust online data collection portals and willingly give their professional information and company product roadmap requirements, yet there is no identifying information about who operates the portal?
Can you trust someone whom you do not know about to objectively guide you in selecting EMS providers best suited for your OEM program when you know nothing about a portal’s (their) background or industry experience? Anonymous portals are motivated to guide you in buying from one of the providers they represent even if this means the provider is not the best suitable match for your business. It’s heads the rep wins, and tails you lose.
“The best manufacturing rep for the job is the one that knows more about the provider’s own technologies or target markets better than the providers know these themselves.”
8. Because manufacturing reps can represent numerous ODM or EMS providers, providers often compete against one another to capture the rep’s attention so the representative will focus their attention on that specific provider’s business. It’s because of this dynamic that different providers working with the same representative will offer reps varying degrees of promotion, or price breaks, to incentivize the rep’s electronics OEM prospects (targets).
The rep then chases the largest pile of money (consideration No. 6) which may or may not be the provider best suited for your OEM program.
9. Suppose an OEM-EMS provider relationship heads south, who carries most of the risk from the fallout, you or the rep? The rep can more easily afford to lose and replace the provider relationship by simply wooing and securing another provider (remember, all providers want to stay in business).
Can you afford to risk your career or your family’s well being if your company holds you accountable for choosing the provider? Some technology end-markets are cyclical, so this also explains why some manufacturing reps push certain providers some times of the year, and then push services offered by other providers other times of the year.
Manufacturing representatives can add value
To be clear, not all engagements with manufacturing representatives, rep firms and / or EMS deals orchestrated by reps carry an inordinate amount of risk.
Scenarios where it makes absolute sense for EMS providers to reach out and leverage additional sales expertise by adding certain qualifications of a manufacturing representative not found within the provider’s ranks — and in doing so, equally becomes beneficial to the OEM buyer — is whenever a provider’s real industry differentiation is so new, and the provider does not have the knowledge base or sales skills set in their current sales force, to adequately convey proper value and benefits to buyers. The best manufacturing rep for the job is the one that knows more about the provider’s own technologies or target markets better than the providers know these themselves.
Cases can also be made for when EMS providers do have informed and skilled employees among their sales force but none of them have the bandwidth to take on more responsibility.
If I were a manufacturer’s rep? Hmm… I would spend hours online reading up on some of the latest topics and growing technologies like RF; robotics, thermally enhanced direct chip attachments, advanced surface metallurgies and organic semiconductors, pre-flow underfill processes or traceless flip chip technology, substrate and interconnect technologies, micro electronics and assembly, nano technologies, 3D printing …
One of my objectives would be to develop an industry-leading knowledge base of information on TAMs; different material properties, environmental ramifications, certifications, regulations…
I’d visit a few university tech incubators: MIT, Stanford, SUNY… And, I’d also want to see what’s new and up and coming by speaking with some contacts at various venture and funding firms plus colleagues at Amazon or Google and other influential firms quietly working on tech-driven projects that have potential for sweeping changes in the electronics industry.
Spend wisely
When engaging ODM or EMS providers, consider dealing only directly with business development professionals employed exclusively by providers you might be considering. Also, ask to have face time with other employees in-house such as provider engineering, EMS program management and other manufacturing operations and functional support personnel who will not directly benefit financially from your decision-making.
Avoiding interaction (at the very least, exercising more caution) with reps not 100% committed to a provider’s business and circumventing reps that may be easily lead by a fist full of money held high in the air by a competing provider master a manufacturing rep is also serving are just a couple of ways you can help to insure the EMS business development person you are dealing with may be more inclined to act in good faith and in your best interest.
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