Outsourcing Electronics Manufacturing: Key to Growth?

Estimated reading time: 3 minutes

The global electronics manufacturing market is a hugely competitive one. And how efficiently an original equipment manufacturer (OEM) can scale up its operations can often be the difference between winning or losing an order.

Business growth is still one of the fastest ways to increase profitability, but it’s vital to ensure that you have the right tools to fuel that expansion and that you’re able to identify and offset any obstacles that could be standing in your way.

Deciding to outsource part or all of your electronics manufacturing operations could provide the means to increase production capacity and improve your sales lead times. But before you choose to hand over responsibility to an electronics manufacturing services (EMS) provider, it’s important to take stock not just of the tangible benefits but also of the potential risks.

In this article, I explore some of the reasons you might choose to outsource, and some of the key questions you'll want to consider before you take the plunge.

Identifying Your Pain Points 

Any period of expansion requires having access to the right site, equipment, and resources. If you’re at risk of outgrowing your existing site, for example, then you’ll need to decide whether an investment in new premises or equipment is really going to be viable. Perhaps ongoing supply chain disruption is having a detrimental effect on your company’s ability to meet its production targets, or maybe you’re finding yourselves increasingly vulnerable to material price increases.

A lack of access to sufficiently skilled labor can make it harder to deliver your orders on time. Maybe your engineering and production capabilities could do with a helping hand, but having to draft in sub-contractors is going to cost you a fortune.

It could be that you’re finding it more difficult to react to increases in customer demand or that you’re experiencing too many quiet periods, which is leading to inefficient downtime. Perhaps you’ve identified that your business’s primary skills lie in other areas.

Choosing to hand over certain elements—such as material procurement, assembly, or test—could free you up to focus on what you know you do really well, whether that’s coming up with new product ideas, overseeing design, or taking care of marketing and after-sales.

How Much to Hand Over

A key question to consider is, “How much of your operation do you want to outsource?” Some OEMs are happy to hand over complete control to the right EMS partner; others prefer to keep a firmer hold on the reins.

There may be some technical elements that you’d prefer to keep in-house, for example. Or you may have developed your own bespoke equipment, which might be difficult for an outsourcing partner to replicate. You might want the option to free-issue materials, or you may feel more comfortable having your EMS partner source all materials on your behalf. Either approach has its pros and cons.

Free-issuing offers the advantage of giving you more control over the component procurement process. But it also relies on you having the infrastructure to handle the volatility of the supply chain and the capacity to hold the stock. In choosing to retain too much control, you could well be adding an extra level of complexity to the very process you're hoping to simplify.

Managing Expectations

Whatever your reasons for considering outsourcing, it’s worth keeping in mind that any new solution is unlikely to be a quick fix. It could be six months to a year before you start to see tangible results. And there may be some uncomfortable moments along the way. It may feel overwhelming to put your trust into something that's unfamiliar. Also, it can be hard to let go of old habits (even if they've not been giving you the results you want.) 

Knowing what to expect (and what’s expected of you) in the early months of a new EMS partnership will be crucial in ensuring that you achieve your goals for business growth.

Neil Sharp is the director of marketing for JJS Manufacturing.