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7 Strategy essentials for electronics manufacturing services (EMS) and ODM providers

By VentureOutsource.com Staff

VentureOutsource.com, in partnership with IDC’s electronics manufacturing research initiative, presents exclusively for VentureOutsource.com readers, 7 strategy essentials for success in the electronics manufacturing services (EMS) and original design manufacturing (ODM) marketplace.

Changes in the credit markets amid a worldwide recession; strategic business models to drive ROIC and protect margins, definitive value propositions and more are just some of the essential guidelines EMS and ODM companies should clearly look into should executives want to remain competitive in this hyper-competitive marketplace.

We are entering a period of economic disruption and EMS / ODM companies need to take steps to address this situation.

Fallout from the US home financing meltdown and a general credit crunch will disrupt markets, despite the growth seen in the first half of 2008. EMS / ODMs need to identify weaknesses in their portfolios, speed up reorganization plans, and otherwise prepare for weaker demand, especially from consumer-oriented markets in the short-term, without causing undue pain for OEMs.

Purchasing activities should be monitored closely along with inventory levels. Projects with long lead-times are particularly risky in terms of growing inventories from weakening demand.

Given the falling value of the dollar, among other factors, offshoring production is likely not the answer to this slowdown. While moving production offshore helped the EMS industry weather the fallout from the dotcom crisis and the last recession, most production that can be moved to lower cost locations has already been sent offshore.

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Also, demand in key end-markets in Asia may be at risk from rising inflation and lower exports due to weak demand from the US and Europe as a result of the financial crisis in the US. As we enter this period of economic disruption, EMS / ODMs need to take steps to address this situation, such as:

1. The current economic disruption reinforces the need for EMS / ODMs to evaluate current product and customer portfolios

With a likely economic disruption, this may be an appropriate time for EMS / ODMs to evaluate their product and customer portfolios. Clients and the products EMS / ODMs manufacture for these clients largely determine financial success.

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OEMs with products enjoying success in the market place are critical. EMS / ODMs need to determine which OEMs are likely to succeed in the coming years and do their best to keep these clients and win business from other likely successful OEMs. They should also look to expand relationships to win production for additional products, if they make sense within the EMS / ODMs business model.

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