Electronic Contract Manufacturing
" Why Outsourcing "
By Paul Heller*
Electronic Contract Manufacturing has grown to be $120 Billion-dollar
Industry. This industry is growing at a rate of 35% annually. What is
driving this tremendous growth?
At a recent meeting of The Association For Manufacturing Excellence Champion's
Group, Senior manufacturing executives were trying to justify continuing
to manufacture internally; however, they found only a few very specific
isolated examples where it did not make sense to outsource. The following
are typical advantages seen by Electronics or Electro-mechanical Manufacturing
Companies that outsource effectively with the right partner.
Advantages to Outsourcing
1. Manufacturing companies that outsource their production, effectively
focus their resources on their core competencies typically improving engineering
development, applications engineering, marketing and sales resulting in
a strategic drive to differentiate themselves and grow their business.
- Do you have the opportunity to truly differentiate your business through
manufacturing internally?
- Few companies can differentiate themselves through internal manufacturing
to the extent they could by otherwise focusing on engineering, etc.
2. There is typically a 20% improvement in quality and reliability.
3. Cost of goods sold is typically improved by 30%
4. Flexibility and responsiveness are improved due to better process equipment,
more expertise in manufacturing personnel and reduced purchasing lead-times
with the right subcontractor.
5. Inventory turnover typically improves from 4 to 9.
It is critical that a Manufacturing Company outsources with clear objectives
understood and accepted throughout the organization. They must also clearly
specify the key qualifications need from their outsourcing partner. The
tier 1 suppliers (>$1 Billion), tier 2 suppliers (>$100 Million) meet
certain customer profiles. The smaller subcontractors also are playing
a major role in quick turnaround smaller accounts and as 2nd and 3rd sources
for manufacturing companies. There is a real value to outsourcing and
a specific process to do it successfully. In addition, selecting the right
subcontractor is crucial to outsourcing.
*Paul Heller has an MBA from University of Rochester.
He served as General Manager at SCI where he built and managed SCI's first
facility in the Northeast. He also was VP of Mfg. at Lasertron, Genus,
and Waters where he successfully outsourced both printed circuit board
and box assemblies. He is now a consultant for NES Technologies, developing
state-of-the-art systems for Manufacturing Excellence.
NES
Technologies, Inc.
8
Norfolk Avenue
South Easton, MA 02375-1156
Telephone: (508) 230-2470
Facsimile: (508) 230-8137
www.nestechnologies.com
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