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New Electronics Outsourcing and Supply Chain Practices Revealed at TFI's December Quarterly Forum
December 16, 2003 |Estimated reading time: 3 minutes
Alameda, Calif. — Supply chain and outsourcing decision-makers from name brand electronic systems companies including Cisco Systems, Coherent, Hewlett-Packard and TheraSense met in San Jose on December 4 at Technology Forecasters Inc.'s (TFI) Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain to discuss new supply chain and outsourcing practices.
Topics included fair terms in outsourcing contracts, environmental requirements of suppliers and continuous improvement in supply chain management through anonymous supplier input. The Quarterly Forum comprised the largest number of OEM, contract manufacturer and supplier members in its 17-quarter history. Outsource consulting firm TFI produces the Quarterly Forum, and this quarter the event was hosted by Cisco Systems.
At the Quarterly Forum was a panel comprising managers of supply chain and operations at original equipment manufacturers (OEMs) in a variety of sizes and from four industry sectors: industrial and medical electronics, as well as networking and computer products/peripherals. Titled "Outsourcing Contracts, Supplier Preferences, and Establishment of Trust," the panel's participants understood component suppliers' desire to negotiate directly with OEMs, rather than through contract manufacturers. They felt that component manufacturers like to work with the OEM customer early in the design phase, and view the OEM as a longer-term customer than the contract manufacturer might be. ncentives from the OEM for EMS manufacturers who drive down prices on a company's bill of materials were also discussed. One panelist allows the contract manufacturer to keep the cost savings for the first six months, after which the cost savings go to the OEM.
Cisco's vice president of manufacturing supply chain Don McLaughlin presented "Managing Outsourced Supply Chain," in which he gave an overview of Cisco's supply-chain strategies and its manufacturing mission, vision and roadmap relative to Cisco's virtual manufacturing.
Bonnie Nixon, who works with HP's Supply Chain Operations Team, discussed the framework through which HP has imbued both structure and discipline into the design and implementation of its supply-chain social and environmental responsibility program. She described three different approaches to supply chain social and environmental challenges: basic compliance, risk management and strategic.
Also on the environmental theme was a session entitled "Efficient Approach to Meeting and Surpassing Customers' and Regulators' Environmental Demands in the Electronics Industry." Leveraging TFI's 16 years of tracking and consulting about critical trends in the electronics manufacturing industry as well as her book Lean and Green: Profit for Your Workplace and the Environment, TFI president Pamela Gordon recommended ways that outsourcing can foster electronic-product companies' ability to meet environmental requirements more quickly and comprehensively. Jennifer Shepherd, corporate environmental manager at leading contract manufacturer Solectron Corp., described increasing customer inquiries about environmental performance (growing by approximately 40 percent per year and becoming more sophisticated) and correlated five key business challenges with OEMs' needs related to environmental issues .
Also at the Quarterly Forum, TFI presented its annual "Electronic Manufacturing Outsourcing Report," forecasting EMS and ODM revenues by industry sector and geography. Wrapping up the day-long forum was a summary of TFI's new report for companies that are outsourcing to China as well as the contract manufacturers and suppliers serving them; the report is entitled "Safeguarding Electronics Intellectual Property in China."
In conjunction with the Quarterly Forum, TFI held its Global Pricing Model Workshop on December 3 at Solectron. Senior TFI Consultant Charlie Barnhart gave Quarterly Forum members a methodology for selecting the best-suited countries for manufacturing their particular products. Elcoteq, the largest European EMS company, and Isis Surface Mounting, a San Jose-based EMS company, both specializing in communications technology, celebrated their new agreement by hosting an open house at Isis. PeopleSoft Inc. hosted dinner following the Quarterly Forum.
The next Quarterly Forum will be March 10 in the Dallas area, focusing on leveraging suppliers' design services, the telecom sector's future outsourcing practices, and manufacturing in the US and in Asia other than China. Quarterly Forum members include electronic product companies, contract manufacturers, original design manufacturers and their suppliers. Corporate sponsors are PLM-specialist Agile Software Corp., the world's sixth largest contract manufacturer; Elcoteq Networks Corp., specializing in communications technology; and Fabrinet, an engineering and manufacturing services company with expertise in the optomechanical, precision electromechanical and optoelectronic industries.
TFI is a strategic-consulting firm helping electronic-product executives to improve supply-chain, outsourcing and environmental strategies for cost benefits. For more information, visit www.techforecasters.com.