Journalist and Founder of SCOOP, writing about manufacturing and the marketing of manufacturing and allied industries.
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For decades, contract manufacturers and EMS (electronic manufacturing services) companies believed in and deployed the “build it and they will come” strategy. They built immense manufacturing footprints and bodacious vertically integrated technical capabilities to win more business and capture more of the value add in a hardware product. Be the biggest, be the cheapest, be the most technically excellent—those were the mantras.
But is that right for the future, or do the brands that outsource their manufacturing want more? And what do the world’s consumers want and expect from the brands they are loyal to and the supply chains behind those brands? The answer, I suspect, is a more thoughtful, more engaged, more agile and more collaborative manufacturing partner.
I’ve talked extensively about replacing the term electronic manufacturing services (EMS) with electronic manufacturing partner (EMP). This is because I believe that we are on the cusp of a real change in the way OEMs (original equipment manufacturers) engage with their outsourcing partners. It’s no longer wise, or even safe, to throw a design over the wall to the cheapest supplier and hope for the best. A brand’s supply chain is now part of the brand itself. It is a reflection of their values, culture and goals. And if it fails, they fail.
For the last 40 or so years, most large contract manufacturers referred to themselves as “the biggest brand you’ve never heard of” or “the brand behind the brands.” They were not the Apples or Dysons of the world, with a proud track record in innovation. They did not inspire fierce loyalty from consumers, employees and shareholders in the way that their better-known customers did. They were not the companies that consumers aspired to buy products from or aspired to work for. But they will need to be in the future.
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We know which contract manufacturers are the biggest and the cheapest, and perhaps that’s important for some brands. But for most, these attributes do not make for the ideal partner. For many OEMs, the larger EMS companies are too big to care and see the customers as important. And I don’t mean tiny startups; I mean brands that spend less than $50 million in their outsourced supply chain.
The Ideal Electronic Manufacturing Partner (EMP)
The ideal EMP brand is not the biggest, but they do need critical mass to ensure that they have a seat at the table in terms of winning business and sustaining their own supply chain through buying power.
They’re not the cheapest—that’s only the priority of a few of the largest brands, and probably should be. Those large brands have the most to lose from a supply chain disaster, be that in lost sales of brand and reputational damage.
They’re not even the smartest, and I use “smart” to mean technically enabled and digitally transformed. Yes, this is important, and you all know I’ve been pushing Industry 4.0 and smart manufacturing for around a decade. But if the smart factory only delivers efficiency and quality, we’ve missed a big opportunity to deliver transparency and better collaboration. Given the current disruptions, I suspect that the biggest digital transformation opportunities relate to more agile, more transparent and more accurate supply chain management. Supply chain visibility will be at the core of future outsourcing partnerships, perhaps even trumping manufacturing technology in importance.
The ideal EMP will be the most collaborative, the most open, the most agile and the most thoughtful. It isn’t the company that talks the most, it’s the one that listens the most and shares the most. The EMP of the future will be a brand with a strong identity in the market and one that is recognized for doing the right thing by every stakeholder, be they customers, consumers, staff and, of course, the communities and environment in which they operate. It will be a brand that other brands flock to and a brand that talent is drawn to.
This feels like a much more grown-up version of outsourcing. A version in which consumers think about where and how things are made as well as where and how they have been designed. Because consumers want change. They want more responsible, more sustainable supply chains that reflect their desires for social justice, diversity and equality. They value speed, efficiency and transparency throughout their supply chains. In an ideal world, they’d like to be as proud of the brand behind their products as they are of the brand whose logo appears on the front of the product.
Perhaps in the future, we’ll see product brands pushing their manufacturing partners’ brands alongside their own. This level of collaboration hasn’t been seen but would be refreshing. How much more attractive is a great product designed by a great brand and manufactured by another?
It was never really about survival of the fittest, strongest or largest; look at the dinosaurs, they were pretty big! And it’s definitely not about survival of the cheapest. That race to the bottom rarely serves anyone, even the consumer who might enjoy the lower prices for a while but will probably have to endure lower quality and poorer performance alongside a negative social impact.
It was always about the survival of the most agile and the quickest to adapt. In times of extreme disruption—and rest assured, we’re in those times—it’s a case of adapting or risking extinction. It’s no time for business as usual.
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Author: Philip Stoten, Forbes Councils Member
