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To Win, Focus on Speed, Not Just Cost

What's the winning business proposition in today's outsourced electronics manufacturing business? Surprisingly, the answer is not cost, leverage, or the aggregation of supply and demand, three attributes often cited as principal virtues by outsourced manufacturing firms. Instead, in our view, the key factor for success in the current business environment for outsourced manufacturing is speed — delivering reduced time to market.

While still essential, cost-cutting is only one factor at this point. Rather, improving the velocity and responsiveness of the supply chain is the key element of success. For years, cost reduction has been among the top selling points for the outsourced manufacturing industry. However, this raises the issue of which specific costs should be the target of the cuts.

To be sure, outsourced manufacturing companies and their customers have spent years scrubbing and reducing supplier lists in the quest to decrease procurement costs. This trend will continue as nearly every OEM supplier cites cost reduction as a key supply chain improvement factor. Furthermore, over the past decade, outsourced manufacturing companies have engaged in massive production shifts to lower-cost locations such as Asia, Mexico, and Eastern Europe in order to lower manufacturing and overhead expenses. Finally, the outsourced manufacturing industry for many years has engaged in restructuring to further bring down costs.

After years of work, these expenses for procurement, labor, and overhead have been reduced materially. In normal times, cost could still be used as a competitive advantage. However, cost alone can no longer be the sole value proposition for an outsourced electronics manufacturer when it assesses its competitive position.

A second much-discussed value proposition is aggregation, whereby both supply and demand are consolidated, large economies of scale are achieved and costs can be slashed even more. A third benefit often promoted by outsourced manufacturers is leverage — i.e., the capability to deliver the kind of scale and reach unattainable on their own to customers.

Yet after all is said and done, speed is still perhaps the key value proposition that outsourced manufacturing providers should aim to deliver.

It's not hard to see why. Competition for end customers is more intense than ever. Supply chains have been extended around the world to a larger degree than what's been seen in the past. For their part, customers need outsourced manufacturers that are able to expand their supply chains to a global level matched by accelerated velocity. By doing so, outsourced manufacturing providers can take capital out of customer supply chains — while at the same time reducing the likelihood of stock-out costs.

Such an approach puts the cost issue into proper perspective, making it one of the many benefits — rather than being the only advantage — that outsourced manufacturing providers can offer. For outsourced manufacturing companies, speed might just be the killer attribute that gives them the winning edge to remain competitive.

16 comments on “To Win, Focus on Speed, Not Just Cost

  1. _hm
    July 19, 2012

    Speed is important but in the end if cost is not controlled, it may be way to bankruptcy.

     

  2. ahdand
    July 20, 2012

    Yes a good and a very valid point which suits the current situation very well. Many focus on cost heavily where as the systems are not being considered as important becasue they do not understand that the systems ar the deciding factor in the future.

  3. Ariella
    July 20, 2012

    People used to say you can have it good,  fast, or cheap but not all three. However, businesses do usually have to at least offer two of the attributes to attract and keep their customers. 

  4. FLYINGSCOT
    July 20, 2012

    I wholeheartedly agree that time to market is probably the key factor in success provided the product is reasonable.  Many times in my career I have seen better quality products lose out to inferior ones because the latter got there first.  Cruel but true.

  5. Nemos
    July 20, 2012

    I totally agree with your point of view but where is “quality” ? So I think the “fast food” way is not only in the food services…. 

     

  6. t.alex
    July 21, 2012

    I have to agree with the quality issue here. I used to work with some vendors from China who promises the fastest delivery. It ended up with quite a number of defect parts and we had to rework in-house for in-time delivery to our customers. It takes time to establish some trust and it is not always the case to stick to the fastest one.

  7. Wale Bakare
    July 21, 2012

    I agree with you but in the long run quality products would still get known, even if not get there first.

  8. Adeniji Kayode
    July 22, 2012

    @Wale, I agree with you on that but sometimes, it could really take a long time before the quality products start getting known and you wonder if this should really be.

  9. Adeniji Kayode
    July 22, 2012

    @FlyingScot,

    I agree with you on that, quality products need to take timing into consideration too so as to create the first impression early.

  10. Adeniji Kayode
    July 22, 2012

    @Nemos,

    You are right on that, the “fast food” thing is becoming a general rule for almost everything that must sell, not only food but even electronics.

  11. Adeniji Kayode
    July 22, 2012

    @_hm, You are right, the two are important factors that must go alongside each other in production.

  12. Ariella
    July 22, 2012

    @Wale, on that point of view, I just saw this quote:”The early bird may get the worm, but it's the second mouse that gets the cheese.” -Steven Wright

  13. bolaji ojo
    July 22, 2012

    Ariella, For those of us who want the first mouse and the second mouse, we kill the first one with the trap and poison the bait for the second one!

    Okay, I was being smart but there's more than one strategy involved in winning.

  14. Mr. Roques
    July 22, 2012

    I think there's room for both types of buyers ,the ones focused on price and the ones focused on time (there are the ones focused in quality as well). So you need to have a flexible supply chain that can handle everyone's special needs.

  15. Ariella
    July 23, 2012

    @Bolaji That's true, and there are always opportunities to build a better mousetrap.

  16. ahdand
    August 6, 2012

    Well what I feel is that if you can have atleast a combination value of all 3 together by not having 2 100% ratios like 65-75% ratios on all three would be much moe bette.

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