Companies both large and small turn to contract manufacturers to help build the products that they’ve created to get them to market more quickly and affordably. That means that the leaders in this space have their fingers on the pulse of the supply chain and all the shifts that are going on.
In fact, today worldwide electronics manufacturing services (EMS) account for 40% of all assembly, a market valued at $1.4 trillion in 2016 that will grow to $1.7 trillion by 2021, according the research by Research and Markets. “While the rate of growth for outsourcing has slowed, it still represents the most desired manufacturing model for the assembly of advanced electronics products available to OEM companies,” the analyst said. “The EMS industry declined approximately 1.1% in 2016 as a result of the slowing of sales for PCs (desktop, notebook and ultra).” The industry subset of contract manufacturing, meanwhile, is experiencing robust growth. It will grow from $425 billion in 2016 to $551 billion in 2021, approximately at a 5.3% compound annual growth rate (CAGR), according to Research and Markets.
We sat down with Meredith Kovarik, a business unit director at Jabil, and previously the director, supply chain for the contract manufacturer to talk about what she sees happening in the supply chain industry in general and the contract manufacturing area specifically. We talked about the newest technologies that the company is leveraging, from artificial intelligence (AI) to 3D printing (additive manufacturing), as well as the hottest supply chain topics including the digital supply chain and environmental responsibility. Jabil, a product solutions company, provides comprehensive electronics design, production, and product management services, as well as complete product supply chain management from facilities in 28 countries.
EBN: How have the services/support that OEMs are looking for from contract manufacturing partners evolved in the last few years? Where do you see it going?
Kovarik: First and foremost, one of the major changes is the pace of change itself. OEMs are being influenced by technology factors that move their value add further up the “stack” into software, services, and consulting. This has diverted resources, both capital and human, away from traditional core businesses like hardware, leaving a gap that they look to their manufacturing partners to fill for them. Manufacturing partners are having to expand beyond pure manufacturing into providing value-add services such as platform engineering, post-sales support, and more than any other area supply chain… Today’s manufacturing partners look more like supply chain consultancies, solving how platforms are delivered seamlessly, and cost effectively, often directly to the end user.
That’s quite a leap for many contract manufacturing companies, both in terms of where and how they invest, not to mentions cultural challenges. These new supply chain centric business models have different investment requirements and risk profiles, and so leadership need to understand the best way forward. Traditional capital-intensive investment models simply aren’t a good solution, even though they may be the most understood. The bridge, and where I see contract manufacturers moving in the future, is investment in digital solutions to empower the market.
EBN: What do you see as the biggest trends in terms of adoption/implementation of the digital supply chain? What are the biggest misperceptions or stumbling blocks?
Kovarik: It seems like these days every manufacturing partner is standing up their own UPS-like delivery tracking and notification system and calling it supply chain analytics or control tower. But in the digital supply chain of the future, this is table stakes, and the ability to track and monitor delivery outcome is just the starting point. Real value comes from not only tracking a specific delivery but looking at how the supply chain is flowing, in real time, and over time. Creating outcome-based scenario planning that is both predictive, proactive and actionable. Deliveries are discrete, but supply chains are not. They are a perfect example of a continuous flow process, and the application of the same process control standards as those used on the manufacturing floor in discrete processes will not yield the same benefit. The partners of the future will employ supply chain professionals that will have degrees in process engineering, mathematics and data science, not in business or supply chain.