OEMs and device makers in high-growth industries are seeking versatile contract manufacturers capable of providing a full range of services.
By Mark Shortt
A notorious mix of trade tensions, natural disasters, geopolitical upheaval, and the COVID pandemic has caused many U.S. manufacturers in the last few years to be wary of the risks of managing long, complex supply chains for their products. The cumulative effects of these factors have convinced companies in a wide swath of industries to re-shore their production to the United States and, in many cases, to further shorten their supply chains by limiting the number of suppliers from whom they receive parts and services.
Boston Consulting Group (BCG) recently reported that, based on a survey of North American manufacturing executives and an analysis of global trade patterns, “more than 90 percent of manufacturing companies in the region have moved at least some of their production or supply chain in the past five years. Of those, half reported that they had shifted more than 20 percent of their manufacturing and supply chain spending.” In addition, more than 90 percent of respondents are reported to have said that they plan to make similar moves over the next five years.
“Changing geopolitics, the evolution of relative cost structures, more frequent and high-impact disruptions, and the push of decarbonization, among other factors, will lead to a massive restructuring of global supply chain networks over the next decade,” Ravi Srivastava, global leader of BCG’s Operations practice and a co-author of the report, said in a release. “Companies need to fundamentally rethink their manufacturing and distribution networks, build capabilities in new geographies, leverage government incentives, and establish new relationships across the supplier ecosystem to enhance their competitive advantage and protect their business.”
In addition to reducing their risks of experiencing supply chain bottlenecks, strategies to shorten their supply chains have helped product manufacturers eliminate some of the additional costs incurred from having their parts routinely re-routed from one shop to another. Rather than having their parts fabricated, machined, welded, and finished by different companies, they can rest easier by partnering with a trusted contract manufacturer who, by performing a full range of services in-house, is able to keep a closer handle on quality through all the various steps of manufacturing.
The need to consolidate their supply base may be more acute for some companies than it is for others. Technological advancements in fields such as AI, 5G, medical devices, consumer electronics, EVs, industrial machinery, and aerospace and defense equipment are boosting demand for printed circuit boards and their components. At the same time, companies working in high-growth, high-tech industries are likely to have intellectual property that they’re not willing to subject to the risks of long, unpredictable supply chains.
This is especially true in industries where manufacturers incorporate electronics and, increasingly, software, to provide differentiating features, functionality, and performance in their products. It’s a long list of industries, with some of the most prominent being medical, aerospace and defense, telecommunications, data centers, automotive, and industrial IoT, where factories are increasingly employing sensors, computer vision, robotics, and other forms of automation to increase efficiency, quality, and productivity.
But in addition to trimming their supply base, an increasing number of OEMs and device makers who fit this description have another significant need—and that’s for custom manufacturing. As companies race to win market share in industries fueled by electronics innovation, many are eager to assert a competitive edge through unique product and service differentiators. That’s where the ability to provide custom electronics solutions comes in.
For product manufacturers looking to distinguish themselves from a sea of competitors, a contract manufacturer who can help them solve the challenges of creating a unique custom product is worth its weight in gold. These days, that type of contract manufacturer can be a custom electronics manufacturer that is capable of providing expert services in electronic design, software engineering, and manufacturing.