Issue link: https://iconnect007.uberflip.com/i/1518339
18 SMT007 MAGAZINE I APRIL 2024 product. Now, customers can decide what configurations they want today and get them tomorrow. It is a major differentiator for the OEM, and also an opportunity for the EMS suppliers to capitalize on proximity. Johnson: How much is that style of built-to-order business growing in electronics manufacturing? It's surprising in the industrial space. ink of the maturity of the Dell model. You can con- figure your laptop, and it shows up the next morning. at's pretty impressive. e Tier 1 companies have been executing quite well in this space. My perspective is shaped more by the sub-$100 million EMS supplier folks. Johnson: Tiers 2 and 3 are probably where the most interesting stuff is happening. at's where the opportunities lie. Certainly, the U.S. is where the largest pool of players is. While there are new service opportunities, in- region fulfillment presents some challenges, or at minimum, some things to consider before you jump into a very capital- and facility-space- intensive sector of the business. Johnson: Is it labor intensive? Yes, but it's no harder than staffing SMT lines, or finding skilled, qualified engineers for that role. is is one of those areas where you can find talent in adjacent industries and pull them in. So, it's one of the easier areas to find tal- ent vs. the usual dynamic of EMS guys steal- ing labor from each other. While the labor pool is a little bit broader, the cost of quality is cer- tainly higher. Barry Matties: Isn't box build more employee-dependent, or is automation really a factor there? Box build comes in a lot of different flavors. ere are places for automation, especially in the high customization piece. e ability is there, for example, to have a robotic arm turn- ing screws. But the lower quantity, higher cus- tomization, just-in-time type of service better lends itself to labor. Johnson: U.S. companies might be looking at box build to increase their revenue, but does it improve their margin? You may lose a point or two in your percent- age of margin, but in terms of hard dollars, it can be quite profitable. You can stack your margins a bit. Keep the traditional board-level business where overheads and everything are already calculated. en, perhaps, add more overhead allocation as you go upstream, deliv- ering higher levels of subassemblies and even final assemblies. But it cuts both ways: Your top line is growing, but your time-to-revenue, inventory, carry, and cash-to-cash cycle will be extended. Many EMS companies operate on a purchase order-to-purchase order model. When you get into this higher level of engagement with an OEM, master service agreements become increasingly important. We all know the example of the $10,000 screw or the $10,000 resistor. You have 99.9% of the bill of materials, and that's great, but you can't build it until you have 100%. With box build, Joe O'Neil