(888) 860-1193

https://www.ventureoutsource.com/contract-manufacturing/lights-out-ems-manufacturing-electronics-assembly-factory/

Lights-out EMS manufacturing electronics PCB assembly factories

By Mark Zetter

Question from EMS industry executive:

True EMS will always have thin margins, which is due to the large percent of “pass through” component cost reflected in both price and cost, diluting margins. As you probably know, ROI is a function of both margin and asset turnover. [Company name] embraces this idea which provides for our high levels of throughput, capacity utilization, and asset turnover. Therefore our ROI will be superior to our competitors, and will provide an attractive return to investors.

We have found that proprietary in-house software solutions are the norm in this industry. [Our] approach is different, going with off the shelf software from industry leading (best practice) providers in equipment automation and smart factories. By implementing an off the shelf IT model, we can easily, and inexpensively, update our systems with the latest software releases and take full advantage of the latest capabilities offered.

Answer:

EMS thin margins are not due to large pass through. This is an easy answer because few EMS want to do the difficult lifting.

Working capital is tied up in operational deficiencies and in inventory, the latter is the easy target. Look at Jabil’s last 10k, then ask yourself why is inventory so poorly managed in a industry that says MCOG is so important?

The reason margins are thin are due to poor management and little accountability across functional teams (indirect and direct), allowing low efficiency despite EMS/divisions appearing to be effective/hitting their quarterly forecasts. Habitual thinking in the EMS industry is keeping EMS management from moving outside their comfort zone and OEM customers are paying for it in higher hard costs and lost opportunity costs

EMS providers have been managing spend and EMS customer operations wrong all of these years because they don’t know any better and didn’t have the right tools.

They’re thinking is, if I ship on time, I’m effective. But why not also reduce costs associated with getting FGI on the dock, plus ship on time, plus do so with fewer people while each person executes faster and with fewer mistakes? This is possible today but it requires understanding technology.

Jabil hasn’t been able to do this, neither has Flex, or Sanmina, Foxconn… SAP and Oracle also cannot do this. Their technology stacks are not complete despite Oracle’s acquisition of NetSuite with its previous claim on EMS. And all other platforms availabe today are more dashboard than innovation.

An artificial intelligence solution exists today for the business challenges and complex nature of the EMS industry where differentiation matters, but there is no individual OTS platform (or combined product) that can be put together without new IP.




Private message OEM peers. Read EMS reviews.

For electronic OEMs. Connect with your peers, access exclusive content reserved for logged in users. Add your EMS review.

Add your comment

Comments

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

TIP: Anyone can post article comments whether or not you are registered. But, if you register or log in you can attribute your posts to your user profile in GlobalNet Community.

Your email address will not be published. Required fields are marked *


*


*

Provider spotlight

About VentureOutsource.com

VentureOutsource.com 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 VentureOutsource.com at 1-888-860-1193 or visit www.ventureoutsource.com