How Electronic Manufacturing Service Companies(EMSs) Can Benefit by Outsourcing to Contract Manufacturers(CMs)

How Electronic Manufacturing Service Companies(EMSs) Can Benefit by Outsourcing to Contract Manufacturers(CMs)

Credit: Michal Jarmoluk on Pixabay

Outsourcing has been a part of the manufacturing world forever. It’s simply inefficient for most companies to attempt to create complex items from the ground up. That’s why many original equipment manufacturers (OEMs) work with electronics manufacturing services (EMSs): to take advantage of the efficiencies provided by specialization.  ‌

OEMs aren’t the only companies that can benefit from outsourcing, of course. EMS businesses can further outsource elements of products to contract manufacturers (CMs). This type of partnership allows EMS companies to focus on their specialties instead of managing every aspect of the manufacturing process alone. Your company can benefit from working with a CM, just as OEMs can benefit from partnering with you.

What Are Contract Manufacturers?

Contract manufacturing is sometimes used as a generic term, but it has a specific function. A CM specifically acts as their partner or hiring firm’s factory. They provide particular products on demand and source the labor, materials, and processes necessary to produce those items.

This is in contrast to other manufacturing companies like electronics manufacturing services. An EMS will provide electronic engineering and manufacturing services to its clients. Some EMS companies offer product development and supply chain solutions in addition to value-added services.

Some companies may act as both CM and EMS providers to different customers. These companies offer contract manufacturing to clients that provide designs and assist others with engineering as necessary.

CMs can play an essential role for EMS companies. For complex electronic assemblies, an EMS can benefit from contracting out elements of the assembly. Instead of reaching outside of your core competencies, you can hire a CM to produce specialized components of your products. You can then invest your resources into design and research, helping you improve your company’s fundamental offerings.

Benefits of Outsourcing to Contract Manufacturers

CMs can provide several specific benefits for electronic manufacturing services. More than simply making your production more accessible, outsourcing can help your company save money, produce better products, and grow more quickly. Here’s how it provides those benefits:

Reducing Fixed and Labor Costs

To manufacture every element of your electronics, you need to manage both fixed and labor costs. As an EMS, your primary manufacturing facilities are dedicated to creating and assembling delicate electronic equipment. Maintaining a secondary location with entirely different requirements adds fixed location costs and the need to hire staff, significantly increasing your expenses.

By working with a CM, you avoid those costs entirely. The CM has the factory and staff already available. Many CMs work with multiple hiring companies, so they benefit from economies of scale in their own staff and manufacturing costs. That gets passed on to you, allowing you to focus your resources elsewhere.

Increasing Flexibility and Scalability

When your company manufactures all of its own components, it takes significant time and investment to grow. You need to predict future demand and attempt to build new infrastructure to support it on your own. Meanwhile, ebbs and flows in orders can be challenging to accommodate. During low demand, you still need to pay your fixed costs, and in times of high demand, you can run out of capacity with no way to get more.

Working with a CM allows your company to be both more flexible and easier to scale. A CM maintains extra capacity, so your business doesn’t need to. You can work with the CM in an overflow capacity or as a primary manufacturer. Either way, you’re able to flex with demand and scale your business much more rapidly.

Improving Quality and Efficiency

CMs specialize in their fields. A quality CM has the experience and supply chain in place to guarantee high-quality products. The CM’s specialty is creating the specific components you’re outsourcing, after all. By hiring a CM, you’re taking advantage of its complementary skill sets.

That makes outsourcing to CMs more efficient, too. You don’t need to waste time and resources to reinvent the wheel. Instead, you can trust your CM to provide you with excellent products and focus your attention on your own offerings.

How Electronics Manufacturing Service Companies Are Working with Contract Manufacturers

Many EMS companies are already working with CMs. These organizations find that outsourcing allows them to remain focused on their authentic specialties while expanding services and increasing their capabilities.

For example, one Chinese mining manufacturing firm has recently worked with NAI to improve its interconnect production. The company needed to increase the reliability and durability of electronic components it produced for custom mining operations. The company’s specialty was mining control equipment, and custom harnesses and housings for unique situations were outside of its wheelhouse.

NAI was chosen as the manufacturer because the firm needed to house delicate electronic components, including inverters and controllers, in a high-pressure, high-risk environment. NAI’s experience with manufacturing items for both industrial and telecom applications made it the ideal CM for the Chinese firm to outsource production.

The results of working together have only benefited the mining project. Working with NAI as a CM has allowed it to reduce the safety risks of its operations, access NAI’s global supply chain, and take advantage of more efficient manufacturing to reduce lead times. In fact, the initial outsourcing partnership was so successful that the firm expanded its collaboration with NAI to cover additional projects as well.

Take Advantage of the Benefits of Outsourcing Manufacturing

Your company’s top priority is to provide high-quality electronics to your clients. There’s no reason that you need to produce all of your components in-house, though. By working with a trustworthy CM with a track record of quality, you can simplify your own company’s production while maintaining the quality of your final result. You’ll benefit from synergies between your firm and the CM in everything from cost to efficiency.

Outsourcing manufacturing should be considered by any EMS interested in growth, flexibility, and cost savings. Focus on your core competencies and let a trusted CM handle things outside of those fields. You’ll see the benefits of your partnership immediately.

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