Electronics Production | October 26, 2010

King Kong, Gorilla & Chimpanzee - all part of the EMS food chain

What is the best way to assess and compare electronic manufacturing services (EMS) companies? Well how about talking of King Kongs, Gorillas and Chimpanzees? Confused? Read on.
The industry has always defined the tiering or segmentation of the EMS industry in a convenient way: by revenue. From this perspective there have generally been considered to be four tiers of EMS: over USD 1 billion, USD 500 million to USD 1 billion, USD 100 million to USD 500 million, and under USD 100 million.

In recent years some people have even created a special tier of those EMS firms over USD 10 billion. While this segmentation method allows for analysis of the industry and creation of many possible micro-tiers for further analysis, it is limited in its insights and excludes those private companies for whom revenue figures are not available.

While providing essentially the same basic services (e.g., PCBA), there are important distinctions among the tiers, beyond financial size and performance, that should influence an OEM’s selection criteria.

Charlie Barnhart & Associates has always preached that a critical element to the success of an outsourced manufacturing relationship is proper FIT (Flexibility, Integration, and Timing) between the OEM and its outsourced manufacturing partner. This FIT must consider, not only revenues, but also scope of manufacturing capabilities and the presence of manufacturing facilities in the proper geographic location(s) to serve the OEM.

This FIT varies based upon the type of services and capabilities required. FIT also has as much to do with an OEM’s self-awareness of its own internal costs and capabilities as those of the EMS provider.

Thinking of the EMS industry as different types of monkeys, real and theatrical, can be a useful, and irreverent, way to consider the industry.

From this perspective there are only three sizes that matter — large, medium, and small. This is a sufficiently sophisticated segmentation methodology for OEMs looking for an EMS partner that will be a good FIT for their needs.

Let’s identify and consider three types of monkeys and the ecosystems in which they live:

1. King Kongs control their own environments but can create havoc. Revenues are greater than USD 1 billion and the manufacturing footprint is truely global with facilities in any conceivable location.

2. Gorillas are intelligent creatures that carefully manage their groups, but tend to get preyed upon by poachers. Here, revenue is between USD 100 million and USD 1 billion.
3. Chimpanzees are active, engaging, and resourceful, but are highly dependent on the food available to them in the jungle in which they live. Reveues are less than USD 100 million.

Like monkeys, EMS providers are not easy creatures to handle, and just as in the monkey house at the zoo, things can get loud and contentious, and sometimes the feces do get flung about.

Source: Eric Miscoll, Charlie Barnhart & Associates
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