EMS/ODM pricing on the rise
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Technology Forecasters, Inc. has just released new research showing that there is now sufficient data to declare that industry-wide, the global downward trend of pricing for EMS and ODM services has reversed direction.
“Given the probability of ongoing inflationary pressures during the balance of 2006 and 2007, I’ve begun counseling clients in my Outsourcing Navigator Practice and users of my True Cost of Outsourcing Model to anticipate increases of 2 to 3 percentage points in 2006 and 3.5 to 5 percentage points by the end of 2007,” said Charlie Barnhart, senior consultant at Technology Forecasters. “This becomes especially important to most OEMs as these increases are most pronounced in quotations from China, Southeast Asia, and Eastern Europe where many companies have moved manufacturing in search of the lowest possible price.”
“As these increases will be reflected in OEM’s COGS, which THEY may or may not be able to pass through to the consumer, it’s time for them (the OEM) to take a hard look at what they’re spending internally in support of their outsourcing initiatives and to ‘do the math’ on what makes sense and what doesn’t. There appear to be few other options as moving from China to India almost always results in a higher Total Cost of Ownership for most OEMs.”
The pricing pressure will undoubtedly increase the emphasis on extended supply network visibility and require OEMs to have strategies in place to respond to changes in price and availability to meet customer needs while managing their own costs.
