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Contract manufacturers must evolve with electronics design
Lavanya Rammohan
10/8/2012 2:21 PM EDT
Differentiation
As roles evolve, contract manufacturers will need to transform their business models accordingly. Not all electronics contract manufacturers are well-equipped to handle the increasing responsibilities and must find their own way to align business models with growth objectives. To keep pace with rapidly advancing product and technology evolution, contract manufacturers must acquire and apply their broader knowledge to product requirements and translate this capability to manufacturing and other operations.
Many contract manufacturers are beefing up design support and joint design manufacturing capabilities. As competition increases, more manufacturers will turn to this strategy for greater differentiation. From the OEM’s perspective, increasing the role of electronics contract manufacturer can speed product development, manufacturing and time to market.
Many factors will dictate the growth of electronics contract manufacturing. While a majority of OEMs already employ this model, some prefer to retain most processes in-house. OEMs previously relied on contract manufacturers to provide them with a global footprint and the ability to capitalize on competitive manufacturing strategies.
OEMs and contractors alike are experiencing a paradigm shift in selecting the right regional manufacturing strategy. Some manufacturing is returning to North America while Mexico is gaining outsourcing opportunities. While China has continued to dominate electronics contract manufacturing, increasing wages and rising logistics costs are offsetting cost savings. Manufacturing location will depend on proximity to OEMs and especially customers.
Outsourcing functions will continue to generate demand from OEMs across different vertical markets, especially where OEMs do not have the resources for manufacturing and supply chain operations. Ultimately, the ability of a contract manufacturer to succeed will rely on managing customer relationships, managing assets prudently and leveraging information to gain a greater market share.
--Lavanya Rammohan is an electronics research analyst at Frost & Sullivan.
Related stories:
Changes ahead for as electronics value chain evolves
Needed: A U.S. manufacturing renaissance
As roles evolve, contract manufacturers will need to transform their business models accordingly. Not all electronics contract manufacturers are well-equipped to handle the increasing responsibilities and must find their own way to align business models with growth objectives. To keep pace with rapidly advancing product and technology evolution, contract manufacturers must acquire and apply their broader knowledge to product requirements and translate this capability to manufacturing and other operations.
Many contract manufacturers are beefing up design support and joint design manufacturing capabilities. As competition increases, more manufacturers will turn to this strategy for greater differentiation. From the OEM’s perspective, increasing the role of electronics contract manufacturer can speed product development, manufacturing and time to market.
Many factors will dictate the growth of electronics contract manufacturing. While a majority of OEMs already employ this model, some prefer to retain most processes in-house. OEMs previously relied on contract manufacturers to provide them with a global footprint and the ability to capitalize on competitive manufacturing strategies.
OEMs and contractors alike are experiencing a paradigm shift in selecting the right regional manufacturing strategy. Some manufacturing is returning to North America while Mexico is gaining outsourcing opportunities. While China has continued to dominate electronics contract manufacturing, increasing wages and rising logistics costs are offsetting cost savings. Manufacturing location will depend on proximity to OEMs and especially customers.
Outsourcing functions will continue to generate demand from OEMs across different vertical markets, especially where OEMs do not have the resources for manufacturing and supply chain operations. Ultimately, the ability of a contract manufacturer to succeed will rely on managing customer relationships, managing assets prudently and leveraging information to gain a greater market share.
--Lavanya Rammohan is an electronics research analyst at Frost & Sullivan.
Related stories:
Changes ahead for as electronics value chain evolves
Needed: A U.S. manufacturing renaissance
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