The always insightful Charlie Barnhart has a post on the Technology Forecasters Inc. (TFI) blog talking about where OEMs are going to find future cost savings. Charlie states that “after a five-year blitz to outsource as much electronics manufacturing as possible, many OEMs have wrung out all the external costs they can from this model – they’ve harvested most of the low-hanging fruit.” Interestingly, AMR Research has conducted studies that show many OEMs actually see costs increase when they outsource even though cost reductions were a primary motivation behind their outsourcing in the first place.

Our customers that focus on improving their ability to respond to change always see cost reductions as a result. They typically come in two forms: productivity gains and reductions in operating costs. Productivity gains come because their current approach to responding to change is incredibly inefficient (frequently relying on a lot of people who only have their personal productivity tools, like spreadsheets and email, at their disposal when trying to respond to changes across their supply chains). Reductions in operating costs come from the fact that a company’s inability to respond effectively to change inevitably leads to “institutionalizing” costly just-in-case measures like inventory buffers, expediting, rework, etc.

Charlie lists several great options for OEMs to reduce costs by looking internally at how they operate. Response Management should be one of the items on their list. Change is one of the biggest drivers effecting business today. You should challenge yourself to see how effectively you’re responding to change. Improvements here can improve customer satisfaction (and your competitiveness) while simultaneously reducing costs.

TrackBack • Digg This • Add to del.icio.us
Posted in General News
You can leave a response, or trackback from your own site.