Would you stake your reputation on a new supply chain in a new region?
The one predicable outcome of trade wars is they tend to make sourcing teams evaluate their outsourcing strategies. Given that project requirements and cost drivers change over time, even without fluctuating tariffs, periodic evaluations can help better align electronics manufacturing services (EMS) partners with current needs. That said, moving to mitigate tariff concerns alone can create a cascade of unplanned costs that far outweigh the cost of tariffs.
Areas to evaluate when considering a move include:
Do you know the quiet leaders? Often they are the ones who get things done.
In 1981, when I started in the electronics manufacturing services (EMS) industry, two things really surprised me. First was that EMS factories saw tomorrow’s tech before the rest of the world. Second was the amazing amount of knowledge resident on the factory floor. That second point always drives me to challenge folks who believe it is impossible to succeed without a college degree. As long as I’ve worked in EMS, I have been exposed to factory workers who learned on-the-job the same things I did in college.
A couple months ago, I had a great conversation with Lois Kenon, a rework/repair specialist at TeligentEMS in Havana, FL. She went to work in the service sector after high school, planning to try a few jobs before going to college, but ended up staying in manufacturing. We spent time talking about her leadership philosophy, and I felt it made sense to share some of that philosophy in my column.
The flow of migrants from south of the border is choking supply-chain routes.
As we enter the middle of 2019, it appears to be shaping up as a good year for many in EMS. Anecdotally, I’m hearing the best reports in years on firm backlog from the providers I regularly talk with. I think this is part function of a good economy, but also due to the material constraints the market has experienced for several years. OEMs recognize that having orders in place can be critical to parts availability. Hopefully, this is actual demand and not the double-booking phenomenon seen in previous constrained markets.
The materials market appears to have good news as well. While a few commodities are showing longer lead-times or allocation, the bulk of component lead-times and prices appears to be stabilizing. A few have even decreased lead-times. This is good news for EMS because component availability has impacted companies’ ability to grow. This is a good time to check customer forecasts, since if orders have been inflated, stabilizing material availability may translate to a pushout
Keep talking – your customer is listening.
If I were to list deadly sins in sales, at the top would be failure to stay in touch with good prospects who are not yet ready to buy. The top deadly sin in program management is failure to stay abreast of what challenges are keeping customers up at night.
In both situations, the outcome is a sale goes to the company keeping a better tab on what that prospect or customer needs. It drives home the need for what I call mindshare maintenance. Mindshare maintenance involves regular contact with prospects and customers to remind them you are out there. When it involves prospects in the sales pipeline, it can be a periodic phone call, a link to an article or white paper the prospect might consider relevant, or a free pass to a trade show in the prospect’s region. The goal is to find a way to share useful information and remind that prospect your company is available, if they are getting ready to outsource. The benefit of doing it at regular intervals is it eventually catches companies just as they enter the ready-to-buy stage.
The revamped online course is supplemented with interactive webinars.
Calculating costs to move physical gear is much simpler than predicting inefficiencies of new locales.
As I write this, a trade deal with China that will eliminate the tariffs appears to be in development, but China is continuing to talk tough. The tariffs are causing significant pain to manufacturers in both the US and China, so I suspect some type of deal will happen eventually. In the meantime, the tariffs motivated many companies to look hard at the geographies involved in their outsourcing strategy. Some OEMs have moved or are in the process of moving some of their business, and a much larger number are thinking about it. I think it is important to carefully weigh the pros and cons.
The potential benefits of moving include: