Electronics contract manufacturing companies are critical partners for Original Equipment Manufacturers (OEMs) who need expert assistance with assembly and manufacturing. The services of contract electronics manufacturers include the assembly of printed circuits, the production of electronic modules, and even entire devices alike. Behind the success of many products introduced to the market is a professional and reliable supplier–an EMS company. Before we go further, let’s think for a second what is the EMS definition, and what does it refer to.
Electronics Manufacturing Services–the EMS definition
Contract Electronics Manufacturing (EMS) applies to the entire industry as well as to a specific class of subcontractors or companies. It is often used interchangeably with the term contract manufacturing (CM). Electronics contract manufacturing companies provide a very broad range of engineering and manufacturing services designed especially for OEMs, allowing manufacturers to focus on their core business, i.e., product research and development.
The contract manufacturing market is constantly growing. In addition to the production side, EMS companies also offer support in the form of shipping management, purchasing assistance, and managing the entire supply chain. The industry is expected to grow by 7.5% in the 2018-2024 period . The growing demand for consumer electronics and innovative technological solutions, combined with growing customer requirements and the need to control costs, mean that OEMs increasingly need to choose to cooperate with partners offering industry knowledge and experience.
Benefits of working with the Electronics Manufacturing Services provider
There are at least four major benefits that you should consider:
Investments in technology, buildings, and qualified staff
Cooperation with the EMS provider for equipment manufacturers who do not have their own production lines, production halls, or a production and engineering team is sometimes the only opportunity to introduce a new product to the market. In fact, EMS requires huge investments in buildings, technologies, and workforce. For companies that struggle with volatile demand, cooperation with the EMS provider is the only logical decision. Outsourcing allows you to save money, time, and turn fixed (typically high) costs into variable costs–the less you order, the less you pay.
Supply Chain Managements
Contract electronics manufacturers work with material suppliers from all around the world. Thus, they are able to respond to the needs of the original electronics manufacturer in terms of sourcing individual elements, and support them in the selection of suppliers and procurement. Thanks to the EMS supplier's cooperation, the client does not have to build complicated IT systems for material management or focus on building relationships with material suppliers.
Professional contractors not only manage the supply chain but also help in building effective business solutions while managing them. Based on BOM and MOQ, they work with material suppliers to keep the client’s excess material as low as possible and thus enable a stable course of the entire production.
A delay in delivery can lead to business and reputation loss. Working with an EMS provider minimizes the risk that orders will not be delivered on time and, therefore, that the delivery of the original equipment will be delayed.
The EMS companies have the appropriate experience and knowledge to manage the entire production effectively. Thanks to economies of scale, it is possible to reduce the unit cost of equipment production along with the increase of the project’s scale.
Different capabilities of the Electronics Manufacturing Services providers
One of the main services offered by the EMS providers is Printed Circuit Board Assembly (PCBA). Currently, manufacturers have modern, fast, and flexible production lines for assembling complex electronic products. As a result, a producer can introduce their products to the market with a guarantee of high-quality assembly, due to precise components placement.
Experienced EMS companies have implemented ready-made processes for connecting printed circuit boards, wire harnesses, and mechanical assemblies along with the testing procedures, which minimizes the risk of errors and production delays.
Working with a company that offers EMS services means that everything happens under one roof and within one process flow, keeping every aspect of the entire process under control.
However, the EMS companies also offer assistance with other services, in particular:
Purchasing, supply chain and inventory management
Guided by bills of materials (BOMs) and material specifications, the EMS supplier buys, receives, checks, stores, collates, completes, and pays for the materials included in each BOM on client’s behalf. Every professional EMS company strives to optimize production costs through optimal supply chain management. As a result, they support OEMs in achieving their business goals.
The company providing the EMS services may perform functional tests with the use of devices and procedures provided by the client or the EMS company can also develop the test device for the OEM. Performing a functional test ensures that only fully operational devices go to the OEM and their customers.
The EMS providers have professional technicians and engineers experienced in production and testing. Thanks to this, we fully overlook the production process and manage customer’s product within the whole production life cycle–including ECO management and product optimization through offering design for manufacturability (DfM) and optimization of the quality and effectiveness for testing (DfT).
Now, it is worth mentioning that the EMS industry is commonly divided into Tiers (by their revenue) . These tiers are based exclusively on revenue. Companies representing Tier 3 or 4 can have exactly the same experience and competences as these from Tier 1 or 2. Threes and fours are simply smaller companies. But on the other hand, smaller companies frequently present more partnership approach and are more committed.
Growth of EMS
From various industrial sectors up to the medical industry, companies are increasingly using EMS services. Gone are the days when OEMs decided to work with a contractor for purely operational reasons. Today, it is part of a well-thought-out overall business strategy. Indeed, manufacturers have discovered that with a collaborative approach, they can achieve significant benefits that improve their planning capacity and enable them to react faster to dynamic market changes. Thus, operating costs are reduced.
As a result of the continuous growth of the electronics market and the use of electronic devices in various industries, OEMs more and more often decide to cooperate with Polish companies. And there’s a number of reasons for that. Just to mention experiences engineering staff, Polish national diligence, and labor costs, which are significantly lower than in Western Europe. If you are interested in cooperating with a Polish EMS company, we advise you to read this article.
Impact of COVID-19 on EMS in 2020
The novel coronavirus epidemic is also not indifferent to the EMS market. Disruptions in the supply chain meant that companies often began to choose local EMS suppliers, resigning from cooperation with companies from the Far East. This is both a great opportunity and a threat to the entire electronics contract manufacturing sector. EMS producers should focus on automation and digitization of the production process. At the same time, it is essential to introduce efficient material resource planning (MRP) investments to be able to fully control inventory and sourcing and manage the entire supply chain. Thanks to this, it will be possible to minimize the risk of component unavailability or delays in deliveries.
The EMS market is constantly growing. Until recently, mainly foreign companies were interested in outsourcing contract production to external partners. Polish EMS manufacturers have also been playing an increasingly important role on the market for many years, being at the same time a beneficial alternative for eastern subcontractors.
When considering working with an EMS company, OEMs should be aware that a contractor can do what they can, but can do it better and more consistently because of their knowledge, experience, and technology. Moreover, cost-wise it’s also a profitable decision, because the contractor manages all of the financial aspects of the production process. Collaboration with a company providing the EMS services can, therefore, be a source of business benefits.