My August column in Circuits Assembly focuses on getting to win-win in OEM-EMS negotiations.
One of the recurring themes I hear in electronics manufacturing services (EMS) is how challenging it is for many program managers and salespeople to negotiate with customers. I’m often told the industry has changed, but when I ask hard questions I tend to find that the biggest change is that the people doing the negotiation seem to know a lot a less about the business of building electronic products than their predecessors. And this isn’t just on the EMS side. Years ago, OEMs put highly technical senior people on the team that managed outsourcing efforts. While those people were tough negotiators, they negotiated based on strong knowledge of the processes and challenges inherent in electronics manufacturing. Similarly, EMS program managers (PMs) were often pulled from operations. If expenses were increasing, they had the knowledge to explain the reason a price increase was necessary. Read more here.
As I write this at the beginning of February, President Trump is establishing himself as a man who follows through on campaign promises. Assuming that trend continues and there is a clear path to tax and regulatory reform, there will also be changes in OEM sourcing strategy. It may even be the level of shift seen when China devalued the yuan.
What does this trend mean for US regional electronics manufacturing services (EMS) providers? Beyond the immediate benefit of regulatory and tax reforms that has many of the EMS CEOs I know practically dancing in the streets, I think it will open the door to significant opportunities across the board. When OEMs outsource offshore, they tend to bundle all their projects. There are two reasons for this. First, a smaller supply chain is easier to manage at a distance and second, low cost labor markets typically have a higher percentage of “one size fits all” EMS providers. When OEMs outsource in the US, they tend to look more closely at the value of tailoring their outsourcing strategy. Niche projects may go to suppliers better interested in those volumes or technology associated with those projects. There may be interest in keeping new product manufacturing in close proximity to the engineering team. There may also be a desire to keep some manufacturing in-house and source production that is not a fit in close proximity. While these scenarios already exist today, tax and regulatory policies which incentivize re-shoring will ultimately increase the number of available opportunities.
The challenge is that if your company is the EMS world’s best kept secret you may not be on the bid list. So, from a marketing perspective, this is the right time to be developing a marketing strategy that will get your company’s name more widely known. It is also the right time to be reviewing existing accounts and looking for additional business opportunities either within the account or other divisions of that customer. The bottom line is that if the Trump Effect continues companies that weren’t on your company’s radar screen as prospects may be ready to buy your services. But they won’t be talking with you if they don’t know who you are. EMS providers that are upping their networking and marketing activities now, will benefit when those companies start re-evaluating strategy.
Powell-Mucha Consulting, Inc. specializes in helping companies develop marketing strategies that build market mindshare and highlight each client’s unique capabilities. This differentiation can be especially important in attracting OEMs pursuing niche outsourcing strategies.We also offer sales and program management analysis, coaching and training services, which can help your team quickly broaden their focus. Contact us if you’d like additional information.
My January 2016 article in Circuits Assembly looks at the Trump Effect and Manufacturing. The correct link is provided, but right now it appears to navigate to CA’s home page so look for the article on the left side of that page, if the link doesn’t take you to directly to the article. I look forward to a year of breaking paradigms and from what I’ve heard in conversations, a lot of EMS CEOs are hoping for the same thing. Read the full article: The Trump Effect and Manufacturing
My December 2016 article in Circuits Assembly looks at another management challenge: managing generationally, and asks the question: are generational differences impacting your program management team’s performance? Read the full article: Better with Age
One of the challenges of our shift to a service economy is that a lot of people have never been inside a factory. My October 2016 article in Circuits Assembly magazine looks at the challenges manufacturers encounter in recruiting and training people with no manufacturing experience. Interesting enough, this particular article seems to have hit a nerve, as I have gotten more unsolicited, positive feedback on it than on any article I wrote in 2016. Read the full article: The Service Economy: Today’s Training Challenge.
My June Circuits Assembly article looks at EMS systems strategy.
One of the most positive trends I’ve seen in the electronics manufacturing services industry over the past five years is the permeation of ERP, shop-floor control and related systems that truly do let businesses work smarter, even in small, one-site companies. I see this as a huge positive because the complexity of information that must be managed on a day-to-day basis continues to grow. Read more here.
One of the interesting dynamics I’ve observed during my career in electronics manufacturing services is the evolution of sourcing strategy. In the ’80s, outsourcing was a risky decision that involved the highest level of the OEM organization. Final decisions looked not only at the immediate need, but at the ability of an EMS provider to support the business needs longer term. Today, outsourcing is more of a commodity decision, and sourcing teams are often staffed by people with far less knowledge of the manufacturing process or the softer issues in the total cost equation. My April 2016 Circuits Assembly article focuses on way to achieve lowest total cost.
Over the years I’ve noticed those new to program management often find negotiating with customers challenging. So, in my February 2016 Circuits Assembly article, I highlighted strategies for improving negotiation outcomes.
It is important to understand the role of the program manager has two parts: First, a program manager is the face of the company to their customers. Second, the program manager is charged with keeping the program on track within the contractor’s business model. In some cases, this role may include managing profitability. In other cases, it is simply keeping program metrics in line with the contractor’s model.
The reality is that if the program doesn’t make a profit or becomes a nightmare that causes chaos in materials or the production area, that customer most likely will be disappointed. Addressing project issues early ultimately contributes to increased customer satisfaction, smoother production flow and greater program profitability. The article lists seven strategies to improve negotiations.
Strategic vs. tactical: which makes more sense?
EMS program management models can vary by provider or even by facility or program team. No one model is ideal for all account types. However, typically program managers can be divided into two groups: tactical and strategic. Tactical PMs focus more on day-to-day activities, while strategic PMs tend to take more of a leadership role relative to their accounts. While many organizations consciously make the decision as to whether their PMs should be tactical or strategic, in some cases it just evolves one way or the other. The downside to lack of defined program management focus is the lines of authority and responsibility can become blurred. In my December 2015 Circuits Assembly article, I looked at both models and discuss the drivers that make one or the other appropriate.
In my latest column in Circuits Assembly, I look at the challenges associated with establishing an operation in Mexico. The increased cost competitiveness of Mexico’s manufacturing, migration of automotive and aerospace clusters, and a lessening of the violence that has plagued the country for much of the last decade have incentivized a new wave of US-based regional manufacturers to look at the benefits of opening operations there as a the next step in their expansion plans.
That said, Mexico remains a country full of complexity when it comes to establishing a viable operation. There isn’t one right answer for best location or business structure. This month we look at some of the tradeoffs to consider when establishing a small operation in Mexico. Read more here.