EMS manufacturing profit center: Production vs inventory costs

By Mark Zetter

EMS manufacturers make healthy profit by warehousing raw materials and finished goods inventory (FGI) for OEM customers. Most OEM equipment companies don’t know how to identify these hidden, internal EMS costs (OEM fees) and, EMS providers do not accurately break out these costs in quote pricing presented to OEMs during RFQ and contract negotiations phases.

Integrating separate eBOMs (program engineering perspective) and mBOMs (manufacturing process perspective) with product lifecycle management (PLM) software helps tie BOM costs to EMS pricing and P&L, but if EMS providers are unable to track your customer inventory of parts per customer program how do OEMs know what is reasonable EMS internal costing (OEM price) for managing your outsourcing program?

Search EMS manufacturing listings

In your search results, you can add more Industry End Markets, more Services plus, you can add more Geographies.

Determine true costs for EMS and ODM services
Search OEM Community

The truth is, most EMS manufacturers don’t know this cost either. So they simply pad OEM customer pricing to make sure they make a profit. The problem is most OEMs simply pay the EMS invoice with question and, without making EMS providers accountable for their pricing.

One end result from OEMs performing adequate contract negotiation leaving out important clauses in their EMS manufacturing agreements? EMS manufacturers hide profits in quoted pricing, and OEMs are unable to accurately track innovations/engineering part IDs while paying more than you should.

To add insult to injury, the EMS manufacturer profit center extends beyond FGI warehousing and logistics associated with your program and taps into extracting financial gain (for EMS providers) from OEM customer fluctuations in forecast demand and production scheduling.

ACCESS ARTICLE: Full content is available to logged in electronics OEM site users only. Registration is free. If you are an electronics OEM professional working in an electronics OEM company please Register or Log In.

Private message OEM peers. Access all content.

For electronic OEM professionals working in OEM companies. Connect with OEM peers and access exclusive content.

Provider spotlight

About is the leading online destination helping electronics OEM decision makers make more informed decisions and reduce risk. We offer educational Webinars, thousands of original articles and helpful tools, a community of influencers who understand the challenges facing your company today, and a comprehensive directory of electronics provider services.

Copyright Venture Outsource, LLC. All Rights Reserved
The material on this site is for informational purposes only and is not a substitute for legal, financial or professional advice. Distribution and use of this material are governed by our User Terms Agreement and by copyright law. By using our Website you agree to site Terms and Privacy policies. For questions please contact at 1-888-860-1193 or visit