Posted on 30 Mar, 2017 by Danielle Olivier
Gone are the days when original equipment manufacturers (OEMs) simply outsourced their printed circuit board assembly (PCBA) to contract electronic manufacturers (CEMs). Today, many CEMs offer a much broader range of services, including an end-to-end outsourcing solution. The end point of such a solution is direct ship fulfilment – whereby the CEM sends fully manufactured and tested products directly to the end customer.
Adopting this approach means ceding more control to your outsourcing partner, leaving you to focus solely on designing, marketing and selling your products. This clearly has its advantages but handing over that much responsibility can also be a source of anxiety.
So, should you use your CEM partner's direct ship fulfilment services?
Direct ship fulfilment in focus
Let’s break down the design and manufacturing process into five phases:
- Product Design
- Material Procurement
- Outbound Logistics
Many outsourcing initiatives involve OEMs asking their CEM partners to buy the parts for their products and then manufacture them (phases two and three), or to carry out those two steps and then test the products as well (phases two, three and four). The CEM sends the products back to the OEM, who then sends them on to the end customer.
However, with direct shipment, your CEM partner takes full control of phases two to five – in essence, you don't see the physical product at all.
Weighing up the pros and cons
You may be wary of choosing an end-to-end manufacturing solution, so let's address some of the fears you might have. Perhaps you are concerned about losing control of your manufacturing operation – you might worry that problems could creep in without you being fully aware of them. Or maybe you are concerned about costs quickly adding up.
These are all legitimate fears and it's important that your CEM partner can alleviate them for you. And a good one will be able to do just that – because there are many advantages to be enjoyed from using your CEM's direct shipment services.
For instance, an end-to-end solution delivers significant savings and efficiencies. By handing over more responsibility to your partner, you can reduce your overheads, downsize (or completely remove) your factory floor, and invest money that you might previously have used to purchase capital equipment into innovation.
The best CEMs will also be able to help your business grow and adapt to meet the challenges of today's manufacturing environment. For example, the Fourth Industrial Revolution (Industry 4.0) is looming and manufacturers are increasingly expected to deliver customised products in shorter time frames.
A good CEM provider will already have in place robust processes and procedures to enable mass customisation, late-stage configuration and postponement manufacturing. Therefore, if you use their direct ship fulfilment services, you will immediately benefit from this expertise, allowing you to better meet your customers' changing demands.
The importance of trust
In answer to the question we posed at the start of this post, yes, we do believe that you should use your CEM partner's direct ship fulfilment services. However, trust is fundamental to the success of an end-to-end outsourcing solution. It's important for OEMs and CEMs to be on the same page and be aligned in their objectives, in order for both parties to enjoy the benefits of an outsourcing initiative.
Clearly, trust builds over time (why not read our post: How to build up trust in a manufacturing outsourcing relationship). So, if you are only just dipping your toe into the water of outsourcing, you may not opt to hand over responsibility for your shipping from the outset. But once you are assured of your partner's capabilities, choosing to go down this route will deliver many benefits to your business.
With more time to focus on designing, marketing and selling, and with your CEM partner's expertise at your disposal, you can tackle the challenges inherent in today's industry head-on without any distractions associated with manufacturing.
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