Comments on: When EMS companies put customers in the driver’s seat, get out of the way

By: Suresh Chohan

Suresh Chohan — Mon, 14 Dec 2009 21:59:37 +0000

I have worked for EMS Industry for over 10 Years now. Worked for the big ones and also also for a smaller one. In EMS world the buz word was, “Customer is King”. I remember my days in Solectron the customer focus teams(CFT’s) worked long hours to make the shipments for the customer(customer pull ins), but after the crash of 99 things changed drastically…. and the relationship changed. Inventory became the main concern EMS was left holding the bag for many a customer. Bob N states it very clearly and it is a fact the main focus in the EMS should be the relationship with the customer and the communication channel should be very strong. It is not only cancellation of projects but the forcast reduction and the NCNR parts cancellation with the suppliers. I have seen the up in the late 90’s and the fall in 2000. lots of suppliers went under and many EMS’s companies were hurt. As the saying goes, it takes two to tango. Unless both the parties learn to dance together it does not work…..

By: Bob Napoletano

Bob Napoletano — Mon, 14 Dec 2009 17:19:01 +0000

Never take your eye off of the customer – demand that they share information about the future and treat you like one of their own. This is the only way you can respond properly to their needs. But what do you do when they don’t. New project, everyone on both sides is high on expectation, the customer says buy the long lead material and let’s get going. Then you don’t hear from them. Suddenly you find that they have put the project on hold and you’re now sitting on 1/2 million dollars of inventory that won’t get used for maybe a year. You want this customer but this is a huge hit and you will probably never recoup the carrying cost for this amount of inventory. They won’t buy it back and you can’t return it. Is this a norm cost of business?

By: Hans

Hans — Sun, 13 Dec 2009 21:11:39 +0000

I like your blog! Yes sharing metrics along the supply chain with your partners is essential in both directions to source and to deliver

By: Jon

Jon — Fri, 11 Dec 2009 22:22:29 +0000

Good blog! This is an excellent topic with implications far beyond EMS.

Far too many companies lose sight of themselves when confronted with unreasonable customer expectations.

When that happens, nobody really wins.

By: Glenn

Glenn — Fri, 11 Dec 2009 17:17:18 +0000

You seem to be speaking primarily from the customer’s point of view. As someone who works for an EMS company, you make some good points about always focussing on the customer. This is true in every business. However, the margins at an ECM/EMS are constantly being squeezed by the customers and profit margins for ECMs are already the lowest in practically any service business. Many ECMs have lost money due to customers’ poor forecasting and due to the ways in which the customers can take advantage of the EMS services offered. Look at all the major ECMs and how much money they have lost over the past few years. It’s obviously not a good business model. You should never run a business at a loss! ECMs are providing good services for customers, but are losing money just the same.

ECMs need to focus on the customer, but also find ways to improve their margins. You need to keep the customer happy to maintain and increase the business with the customer. But also, the ECM must find ways to make a profit. Any problem in production is usually paid for by the ECM. One of the only ways to make a profit is to maximize material PPV. There really isn’t much else. And providing cost reductions to customers is something the customers surely want, but are usually based on unrealistic expectations.