Adapting Covid-era processes to a more rational demand level.

I frequently say that program management is the most challenging job in the electronics manufacturing services (EMS) industry because program managers are expected to keep programs on schedule with little control over the variables that need to align for them to be successful in their jobs. Supply-demand imbalances in both the supply chain and with customers have made that job even harder. And, just like those late night informercials that tease “but wait, there’s more,” the chaos of the past two years is about to get worse.

The new challenge program managers are starting to see this year is a return to historical demand in many customer industries. Material availability is starting to improve in some areas, but not all part manufacturers are relaxing the draconian noncancellable, non-returnable (NCNR) policies put in place during the supply-demand imbalance. That basically means that even if customer demand is coming down, in some cases, orders scheduled for delivery several quarters from now can’t be adjusted with some suppliers because extended NCNR terms put in place when chipmaking capacity was at a premium are still present.

Embracing the fear-based sell.

In times of uncertainty, the fear-based sell can be very effective in the electronics manufacturing services industry. There is no question that the past two years – and the current one – qualify as times with a lot of uncertainty. The difference between the prior two years and this one is that the uncertainty factor was so high in 2021-22, many customers were afraid to rationalize their EMS supply-chain strategy due to component availability concerns. OEMs are shopping now, however. The question becomes: How do you differentiate your company from the rest of the industry? The solution lies in the fear-based sell. In its barest form, the fear-based sell advertises a fear that keeps customers up at night and then discusses how your company keeps that from happening. The differentiating value proposition can be more elaborate, however.

Returning to normal is bringing new and familiar obstacles.

As I look back on 2022, I’m thankful for the return to normalcy I’ve seen. That said, this normal has new and continuing challenges for the electronics manufacturing services (EMS) industry. Here are a few that I see and some tips on better preparing for them.

Teams are overworked and on the edge. How to combat the slide.

One of my favorite bosses pointed out that a contract is only as good as the intent of the parties who sign it. Yes, you can haul a party in breach of contract into court or arbitration, but the resolution rarely completely fixes the issue, and in many cases parties breach agreements with no consequences. Nowhere is that more evident than in today’s semiconductor industry. You’ll get parts when they arrive even when there was a commitment for an earlier date; they may cost more than the agreed-upon price; and the order is noncancellable regardless of how many previously agreed-upon terms change. In short, one party has no intent to adhere to the terms of its agreements, and market conditions will likely enable that behavior to continue indefinitely with no consequences.

This type of environment can be as contagious as the most recent Covid variant. Customer service and honoring commitments are sliding across the board. Last month, I listened to a gate agent lecture a 6 a.m. flyer who foolishly thought she could get to her destination in a single day, saying the airline wasn’t obligated to put her on a different airline until she had been stuck in transit for 48 hours. Separately, three contractors I called for glass cutting informed me that they couldn’t commit to a time for quoting or delivery but would a call an hour before they arrived. One finally did call back a week later and got the job. The other two still haven’t called back. When all competitors in a market are getting away with behaving badly, mediocrity thrives.