Quarterly Forum Critiques OEM Strategies

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ALAMEDA, Calif. During the Technology Forecasters Incorporated (TFI) Quarterly Forum, OEMs, EMS providers, and suppliers discussed successful approaches to outsourcing, and analyzed challenges facing OEMs and manufacturing partners. Environmental regulations such as China RoHS represented a considerable challenge without clear solutions. Attendees also noted that low-volume/high-mix (LVHM) products offer increased potential for global electronics outsourcing, though profitable and socially responsible manufacturing becomes more difficult in this sector.

TFI found that focus on internal management costs for OEMs, and efficiency at the supplier interface benefit outsourcing companies more in the "second wave" of global electronics manufacturing than in the past. Compliance with environmentally conscious legislation proved a factor in profitability.

TFI president Pamela Gordon presented the results of the research firm's eighth benchmarking study on environmental requirements, focused on OEMs' performance and profitable compliance. The 127 participating OEMs rated their own companies the average grade of 'C' for prompt, effective management of product-focused substance and recycling legislation and regulations worldwide. Gordon suggested that proactive design for environment (DfE) that keeps a company ahead of customer and regulatory requirements offers substantial cost benefits.

TFI Environment, a consulting specialty of the research company, provides services to help electronics and software companies create environmental strategies for products and facilities/operations. The program reportedly aims to increase competitiveness and profitability, while maintaining environmental compliance.

Michael Kirschner of Design Chain Associates updated attendees on China RoHS, based on translations of Chinese-government guidance documents recently finalized. Despite some similarities with the EU RoHS, China's regulations require specific preparation and knowledge for companies producing product for the Chinese market. Kirchner cited the requirement for product testing performed by domestic Chinese facilities, and consequences that were irrelevant during the EU's RoHS implementation. He also touched on rapidly approaching deadlines, and lack of legislative clarity.

TFI reviewed the alliance group, eKNOWtion, based on the concept of supply-chain maturity. The presentation outlined a survey of 800 companies focused on audit procedures and the functions of "plan, make, source, deliver, and return." Bringing these functions outside the company to cross-corporate efficiencies creates smarter supply-chain advances, said the group's Kathleen Geraghty.

A quarterly research update on electronics manufacturing in India supported certain trends around imports and manufacturing. A Web survey of more than 400 electronics-industry managers found that the number of electronics companies selling product in India will rise by 24% in the next two years, with companies manufacturing in the country rising by 63%. India attracts OEMs and EMS providers with local-market potential, unlike the export-based China strategy, said Bruce Rayner, vice president of research for TFI. OEMs and EMS providers need to determine the size of India's consumer electronics market, he added, noting that significant electronics-purchasing occurs when household incomes reach $4,500/year. This consumer group is expected to double in size over the next five years.

Analyst Warren Miller presented "Understanding the Value of Distributor Design Service," a study of methodologies allowing component suppliers and distributors to measure return on investment (ROI) of design-support programs. Disparate geographical locations for design and volume production disproves traditional business models for paying for design services, said Miller, adding that globalization creates new priorities for design support for components commodity and sole-sourced and payments. The study presents a model for measuring this value.



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