Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Electronics Production | December 14, 2006

Next Wave of Outsourcing Will<br>Focus on OEMs' Direct Costs

A common theme arose during the discussions at TFI's Quarterly Forum last week: knee-jerk reactions on the part of OEMs and their manufacturing partners to the challenges of global electronics manufacturing are not working.

Attendees expressed considerable frustration at the tactical measures they are taking to meet environmental regulations such as China RoHS and finding profitable and socially responsible ways to manufacture the low-volume, high-mix products that represent the next wave of electronics outsourcing for the global arena. "I am so tired of the fire drills for WEEE, RoHS, and now China RoHS," one attendee from an OEM member company complained. There is a better way. The first wave of outsourcing transferred OEMs' manufacturing costs from their bottom line to that of the EMS. Now it's time to focus on the OEM's internal management costs and the efficiencies that can be wrung out of the supplier interface. The first step is knowledge and TFI's Fourth Quarter research provides significant illumination. At the event held in Sausalito, attended by OEMs, EMS and suppliers, TFI President Pamela Gordon presented the results of TFI's 8th benchmarking study on environmental requirements, this time focused on OEMs' performance and paths to profitable compliance. "The study's 127 OEMs graded their own companies a "C" for keeping up with new product-focused substance and recycling legislation and regulations worldwide. Our members see the business value of approaching 'design for environment' proactively, such that they are ahead of customers' and regulators' increasing requirements." TFI Environment, a consulting specialty of Technology Forecasters Inc, is helping numerous electronics and software companies' executives understand and create environmental strategies (for products and facilities/operations) that boost the bottom line and enhance the companies' competitiveness and employee satisfaction. This report was followed by a timely update of China RoHS by Michael Kirschner of Design Chain Associates, based on translations of Chinese government guidance documents finalized just days before. There is some overlap between RoHS and China RoHS, but the differences are extremely significant - and companies must prepare if they want to market products to Chinese, according to Kirschner. For example, the requirement for product testing by domestic Chinese facilities will have significant consequences that aren't relevant to EU's RoHS. Incredibly, the deadlines are fast approaching even though many of the most basic requirements of the laws are not finalized. Also on the program was a review of an action-oriented approach from TFI's newest alliance group, eKNOWtion, based on the concept of "Supply Chain Maturity." The presentation outlined the dire consequences of ignoring this key performance indicator based on a survey of 800 companies. Investing in thorough auditing and measurement around the functions of Plan Make Source Deliver and Return can have immediate pay-off, bringing organizations up the ladder from a purely internal functional approach to cross-corporate efficiencies. "We have an obligation to our companies, suppliers and customers to make smarter supply chain advances," eKNOWtion's Kathleen Geraghty emphasized. "Getting it right starts with a simple measure of maturity, leading to priorities that will synchronize supply chains. The TFI community is primed to put this approach to work in the race for supply chain advantage." This quarter's research on electronics manufacturing in India uncovered several trends: Based on a Web survey of over 400 electronics industry managers, TFI projects that the number of electronics companies selling product in India will rise by 24% in the next two years. At the same time, the number of companies manufacturing in India is likely to rise by 63% during the same period. Most OEMs and EMS providers are attracted to India by the potential for serving the local market, which differs from the typical manufacturing strategy in China. The question for OEMs and EMS providers alike is: Just how big is India's consumer electronics market? "That depends on your assumptions about the size of the middle class," explained Bruce Rayner, TFI's vice president of research. "For most electronics goods, significant purchasing doesn't occur until household income reaches approximately $4,500 per year income level. The number of Indian households earning $4,500 a year or more today is about 18 million, or slightly less than 100 million people. Over the next five years, that figure is expected to double, with dramatic consequences for the consumption of electronic goods, including cell phones, televisions and refrigerators." In a ground-breaking study, Understanding the Value of Distributor Design Service, TFI Analyst Warren Miller outlined a new and comprehensive methodology allowing component suppliers and distributors to measure ROI of their design support programs. The methodology represents another new practice area for TFI - one that will help address the supply chain challenges of globalization of design and manufacturing. "When design occurs in one geographical region, but then production volumes move to another, the traditional business model for paying for design services breaks down," said Miller. "The de-coupling of design chain activities from the production volume orders through globalization has created the imperative to re-think design support for components - both commodity and sole-sourced - and how these services are paid for. This model provides the industry with a common way to measure the value."
Ad
Ad
Load more news
April 20 2019 11:13 am V13.1.0-2