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Electronics Production | August 24, 2007

Location: Redefining an EMS' role<br>in the Supply Chain

It use to be in the past, and it still is the case that OEM would outsource its core electronics manufacturing to an EMS provider.
By Dave Cooper, Vice President, Consumer, Solectron

An EMS provider puts the little parts on the green PCB boards, and ship them half way around the globe to multiple hubs and locations, in order for an OEM to do the final test, pack, and ship out to various sales channels.

So the question is why an OEM would consider pick, pack, and ship as a core competency?

The EMS companies are spreading their reach into the supply chain, developing capabilities outside of their plants' four walls and into the game of logistics, distribution centers, postponement and aftermarket services on a global scale.

As OEMs continue to transform from manufacturing to marketing organizations, needing to grab market share by achieving maximum inventory velocity in an end-to-end lowest landed cost supply chain configuration, they should be highly motivated to redefine the role of their preferred EMS in the supply chain, Solectron blog reports.

An EMS could take on the complete end-to-end operations from an OEM, leading to reductions in inventory and invested capital in a major way.

According to Technology Forecasters' June 2007 report by Jonathan Gilbert, more than 50 % of OEMs continue to perform their own internal logistics, 25 % is outsourced to third-party logistics providers, and just over 20 % have their EMS performing direct delivery out to the final customer in the sales channel.

The question is, how long and what will it take for the OEMs to finally give it a try?
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