Electronics Production | September 01, 2009

Deep collaboration as the key to successful outsourcing

Continuously shortening product lifecycles in the mobile phone market requires EMS companies to react promptly to offer customized services to OEMs.
An EMS has to be actively involved in the OEM’s product value chain to synchronize its way of working with them. Having a deep collaboration with OEMs can add to a better understanding of cost structures and supply chain issues. The OEM and EMS can work jointly on such a basis towards a competitive cost level.

Deep collaboration consists of product roadmap sharing, process alignment, open communications, transparency, mutual long term commitment and co-location. In practice, there is product and technology sharing from both parties and commitment between each other to capitalize on complementary strengths.

Accelerate time-to-market and time-to volume
Collaboration and transparency help both the OEM and EMS anticipate the market’s movements and provide agility to evolve with market demand. When the OEM and EMS work together from the design phase, share their expertise, and consider the product’s entire life cycle, they are able to identify the potential risks, anticipate changes in the supply chain and react to them more rapidly. These factors help in achieving a secure source of supply and enable flexible deployment of resources, which foster efficient delivery of customized products and solutions. It becomes more feasible to achieve shorter time-to-market and time-to-volume.

Reduce field failure rate
Designing and manufacturing quality products can save money and reduce cost of ownership. Field failure rate can easily be the difference between a great business case and a disaster, both for the OEM and the EMS. Costs associated with product returns can be significant. Quality and consistency in systems and operations must be built into the product from conception through the end-life of the product. When both parties share best practices during the planning, design and manufacturing stages, many failures can be avoided. Product roadmap sharing helps both the OEM and EMS define their long-term goals and identify the technologies and strategies needed to achieve them.

Transparency of strategic planning data makes it easier for both parties to analyze the total cost of ownership (TCO) and monitor and evaluate suppliers and service providers throughout the product value chain. The chances to incur unexpected changes and costs are reduced. Technologies and processes in the system can be monitored and continuously evaluated to reduce TCO.

Secure brand value
OEMs can be hesitant to work with an EMS company because they are afraid to diminish or risk their brand value. Collaboration enables an EMS to better understand the OEM’s value proposition. They can build consensus on targets and are better able to build quality and consistency into the product from conception through end-of-life.

The growth of the multimedia phone category adds many more dimensions to the OEM/EMS relationship, as these products are far more complex than previous mobile devices and require involvement of technologies and companies not previously involved in mobile phone production. It becomes even more essential for EMS companies to focus their resources on close collaborative relationships with their OEM customers. Engaging in these interactive relationships with a strategic approach enables them to more effectively develop highly complex products and customize them to each OEM’s specific requirements for design and capabilities. In return for this collaboration, the OEM will be able to generate better profits through outsourcing.

: Carsten Barth; The Elcoteq Blog
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