SMT007 Magazine

SMT007-July2020

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12 SMT007 MAGAZINE I JULY 2020 It is interesting to note that this fast-growing industry was not noticed by Wall Street until the mid-1990s (passing $100 billion mark in 1999). Today, the same concept of manufactur- ing outsourcing has spilled over to other indus- tries ranging from pharmaceutical to consumer staples, as well as to other functions, such as human resources and information technol- ogy management. In parallel, the scope of out- sourcing continues expanding and its capabili- ties are proliferating, becoming an integral part of supply chain management. When looking at the potential pros and cons of outsourcing, manufacturing outsourcing can potentially offer a number of advantages cov- ering various business aspects, namely: • Economics and cost savings • Improvement in business focus • Operational efficiency • Technological prowess • Capital allocation • Time-to-volume • Time-to market • Geographical advantage • Proximity to customers • Shared risk or transferred risk down the food chain • Streamlining the complexity of business As an aggregate, these potential advantages offer tremendous appeal to a business, par- ticularly in meeting the immediate competi- tive needs. The benefits can be vividly evident when a goal-oriented and well-thought-out strategy is effectively executed. On the flip side, caution and alerts are in order. With the establishment of EMS, does this mean that technology-based companies can forgo core engineering competencies, including manufacturing technology? It is always a strategic decision to take advan- tage of the benefits of outsourcing without los- ing the fundamental knowledge and know-how. The critical thought-process goes to assess core competencies and to sort out the functions or products for outsourcing from those that need to stay in-house. Even after a product or a function is identified to be outsourced, it takes engineering competencies to pose the "right" Business Strategy: Re-Evaluate Outsourcing For manufacturers, the first order of business is to strategize the business model, assessing outsourcing, or not outsourcing. Over the last three decades, the electronics industry has been characterized by its fast-paced techno- logical development, inevitable down-spiral pricing, and market globalization. These also have been the top drivers behind manufactur- ing outsourcing. The underlying concept of outsourcing can be expressed—simply put— as finding a better or more cost-effective way to have products made or services rendered, meanwhile freeing up the resources and time for "essential" or more critical tasks [1] . The history of outsourcing in the U.S. is worth noting. It is a reasonably fair statement to say that the electronics industry's circuit board manufacturing essentially pioneered the process to implement a full-blown out- sourcing strategy in the late 1980s and early 1990s (depending on how we define a start- ing point). Gradually but steadily, manufactur- ing outsourcing within the electronics industry has extended upstream from the board assem- bly level (semiconductor packaging, integrated circuits foundry) and downstream (system, box) along the food chain. This created a new market and business sector, which originally was termed as contract manufacturing (CM) and later evolved to electronic manufacturing services (EMS), which is deemed to be a more appropriate representation for its expanded services.

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