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OEMs look to cut number of contract manufacturers |
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OEMs look to cut number of contract manufacturers
11/7/2012 12:05 PM EST
SAN FRANCISCO—More than half of the world's electronics OEMs plan to reduce the number of contract manufacturers they work with over the next year, according to the results of a survey conducted by market research firm IHS iSuppli.
About 51 percent of OEMS that responded to the survey said they would cut the number of outsourced manufacturing services providers they use in an effort to reduce costs, maintain profitability and streamline operations, according to IHS.
IHS's outsourced manufacturers survey, conducted during a six-week period in late July, was sent to more than 1,000 of the firm's clients in electronics supply chain through all major global technology regions.
"The IHS survey reveals that most OEMs want to trim their outsourced manufacturing supply base in order to bring down cost, with the consolidation of suppliers serving as the next biggest reason," said Thomas J. Dinges, senior principal analyst for EMS and ODM research at IHS, in a statement.
"While the impact of this trend is still to be determined, such a move by OEMs potentially could result in a reduction in the number of electronics manufacturing services (EMS), original design manufacturers (ODM) and joint design manufacturers (JDM) competing in the outsourced manufacturing business during the next 12 months," Dinges said.
On average, each OEM now works with eight outsourced manufacturing partners spanning EMS- , ODM- and/or JDM-type engagements, according to the survey.
Major issue in China
According to IHS, survey respondents represented a wide swath of electronics, spanning industries including communications, computing, consumer electronics, automotive/transportation and industrial. The survey covered an array of topics related to outsourced manufacturing, ranging from major issues like expectations for contract manufacturing activity, to detailed subjects like payment terms, inventory terms and sourcing discretion, according to IHS.
Most OEMs that responded said they believe that outsourced manufacturers can help reduce costs. But the vast majority of respondents said they have no visibility into the cost structure of their EMS, ODM and JDM partners, IHS said.
Overall, the two most commonly cited changes that OEMs say they want to make with their outsourced manufacturing services providers during the next six months are lead-time reduction and price negotiation, IHS said.
The survey also identified another major issue in China, IHS said. Despite all the labor issues that have come to light in the country, almost half of OEMs there still don't require third-party audits of their outsourced manufacturing providers in order to ensure compliance with local labor laws, IHS said.
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