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OEMs turn to contract manufacturers to cut costs

Posted: 14 Jun 2007 ?? ?Print Version ?Bookmark and Share

Keywords:OEMs? contract manufacturers? consumer product development?

More and more OEMs are turning to contract electronics manufacturers (CEMs) to help them focus on low-cost product innovation and marketing, new analysis from Frost & Sullivan revealed. The consulting firm said the emerging trend comes from the desire of these equipment manufacturers to address the decline in consumer product life cycles.

With OEMs zeroing in on product development and outsourcing operations from other parts of the value chain, contract manufacturers are expanding their presence in the OEM supply chain.

Contract electronics manufacturers in Europe, for instance, saw profits of $37.7 billion last year. They will likely earn $67.2 billion in revenues in six years' time.

"In a complex manufacturing environment with challenging product life cycles, collaboration across the industrial value chain is a key element in creating successful business propositions," research analyst Rengarajan Srinivasan said.

This is why restructuring has been the trend in many vertically integrated companies, entities that were formerly responsible for both product development and manufacturing, Frost said in its latest "European Contract Electronics Manufacturing Industry Value Chain Analysis" report.

Srinivasan also named increased globalization as a factor in CEM groups and CEM vendors expanding their reach worldwide.

Contract manufacturers have especially begun to hone their production planning and demand forecasting skills by seeking a completely visible supply chain. This improves their flexibility and ability to quickly respond to market changes.

The report said that in the future, it sees the electronics value chain to be a highly collaborative network designed for maximum flexibility and on-demand manufacturing efficiency.

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