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Electronics Production | January 23, 2009

Five ways for electronics manufacturers to weather this storm

In Q4/2008 the electronics industry joined the rest of the global economy in announcing layoffs, missed revenue targets, plant closings, earnings downgrades and outright business failures. Many companies are hunkered down for a dismal 2009.
But history tells us that things will improve, and those with long term strategies and endurance will come out of the global recession stronger and more profitable than ever. Market researcher Charlie Barnhart & Associates (CBA) identified five things you can do to ride out of this storm a winner:

1. Track geographic risk early and often. CBA data suggests that costs and risk in certain geographies have increased dramatically in the past 60 days.

2. Keep your suppliers close. Now is not the time to beat up suppliers on price and risk supply disruptions. As one CBA client put it, "If losing an order because of a shipment delay during good times is considered totally unacceptable, in bad times it probably constitutes criminal negligence!"

3. Reconsider a regional strategy. After Y2K many global manufacturers chose an integrated supply approach to realize economies of scale and low cost labor. Yet the unintended consequence has been to increase risk. In addition, some OEMs have been forced to jump from one region to another as inflation and labor rates cut into profits. These expensive and unforeseen results are causing many to rethink a regional strategy.

4. Understand your total cost. With labor rates and other costs rising rapidly in low labor cost geographies a yearly update is not enough. Relying on forecasts that merely project past trends into the future can be dangerous. You must keep track of the metrics that are at the root of economic forecasts and track the leading indicators that drive economic trends.

5. Benchmark what your competitors are paying for EMS services. Knowing industry averages can help keep your own expectations realistic.

Image source: Asti

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