Disconnects exist between OEM’s and contract manufacturers
EMSNow has a new story featuring new research by Technology Forecasters, Inc.
The research identifies a continuing disconnect between what electronics companies want and what they say they are receiving from the contract manufacturers that build their products. The article says, “This study gathered an unprecedented volume of good primary source data for the industry, with some surprising results. For example, 64% of the OEMs interviewed said that communications with their manufacturing suppliers were implemented through phone, fax, and email, rather than through any kind ERP system,” explained TFI Senior Economist Matt Chanoff, principal writer of the EMS/ODM Report Card and Buyers’ Guide. “Although nearly all companies on both sides of the supply chain run their own automated ERP systems, the majority appears not to be connected, and many respondents expressed frustration to us.”
One of the biggest challenges we see in this distributed manufacturing environment is the disparity of ERP systems. If you’re an OEM, you may be running Oracle as your ERP system. Yet, you may outsource to 3 contract manufacturers that are running Oracle, SAP, and Baan as their ERP systems (this situation gets worse if you’re in multiple plants across these contract manufacturers since there’s no guarantee they have the same ERP system in each plant). So, integrating data across these systems is challenging at best.
Then there’s the issue of what to do with the data. First, ERP systems are excellent at executing transactions - helping you run the business like clockwork. But, they weren’t designed for the problems that we’re dealing with today - multiple, integrated 3rd parties working together to form a supply network and having to deal with the reality that the business rarely runs like clockwork anymore (as one customer told us, “we build a good plan…then the phone rings.”).
The reality is that all parties across this extended supply network need multi-enterprise visibility to get everyone on the same page, but then tools need to be put into the hands of the people so they can react quickly to constant change. OEM’s are in a particularly tough spot given that they’ve outsourced their manufacturing, but are still accountable for the end result with their customers and shareholders. They, as much as anyone within the supply network, need visibility and the ability to coordinate the efforts of all involved to ensure their objectives are met. An OEM can’t simply outsource and say “that’s not my problem anymore, that’s why we outsourced.” The reality is that they are still responsible for the result and, therefore, need to be actively involed in ensuring it’s outcome (this should not be confused with micro-managing the contract manufacturers or even taking back manufacturing - there’s a coordination role here that the OEM must play).
