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James Carbone -- Purchasing, 9/16/2004 2:00:00 AM
While electronics outsourcing is not new, it probably is the single biggest continuing trend in the electronics industry. The electronics manufacturing services (EMS) industry is forecast to grow from $92 billion in 2003 to more than $160 billion in 2008, according to market researcher iSuppli. In addition, the original design manufacturer (ODM) market will grow and compete with EMS providers. ODM revenue is forecast to rise from $40 billion in 2003 to $101 billion.
What does this mean to purchasing? A lot. In the next several years, purchasers involved in make/buy decisions for their companies will have to recommend which outsourcing solution to use: ODM or EMS. ODMs typically design a product, manufacture and ship it to the OEM's end customer. An EMS company will manufacture a product based on the design that the OEM provides. However, some EMS companies are turning more to an ODM model and are beefing up their design capabilities for some products. This trend will provide more options for OEMs, but complicate the decision making process for buyers involved in outsourcing decisions.
As OEMs outsource more manufacturing, they also have to decide how much purchasing should be outsourced. Large OEMS typically maintain control of sourcing for strategic components and materials and outsource low value commodities and materials.
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