Why OEMs are Reshoring Electronic Manufacturing Services More Than Ever Before
In the past, many original equipment manufacturers (OEMs) have outsourced their electronic manufacturing services (EMS) to low-cost countries such as China. This has enabled them to take advantage of lower labour costs and helped improve profitability. However, more recently, there has been a trend towards OEMs bringing their manufacturing operations back to the UK. The reasons why are compelling.
There’s little doubt Brexit caused a flattening of the UK economy. We then took a sharp hit during the Covid-19 epidemic. The resulting downturn is proving to be a significant factor in driving today’s trend towards the idea of reshoring EMS.
Although steady growth means we are now back at pre-pandemic levels, the shockwaves continue to cause widespread disruption to global supply chains, leading many OEMs to re-evaluate their manufacturing strategy. (Martin & Haskell, 2023)
The Dangers of Relying On A Single Low Cost Centre (LCC)
The shutdown of EMS factories in China, including one of the world’s largest near Shanghai, has exposed the risks of relying on a single source for critical components. (Hale & Hille, 2022)
The effect of the pandemic has inevitably led to delays in the delivery of goods, shortages of materials, and increased transportation costs. Meanwhile the continuing economic troubles in China are forcing many UK based OEMs to consider reshoring their EMS to reduce supply chain risk, increase flexibility and gain more direct control over their manufacturing operations.
The competition within the UK EMS sector is sufficient to ensure an offer of stable pricing, consistently high quality and the reliability which OEMs expect as standard.
The increasing demand for high-quality, innovative products means OEMs need to bring their products to market faster than ever. Having their EMS close to home can achieve this objective by providing clearer, immediate feedback and more efficient collaboration between engineering and manufacturing teams.
Trust and Confidence
A site visit is always a great way to cement strong and profitable relationships. Knowing your account manager who understands your business requirements allows more freedom to concentrate on building relationships with your customers without the worry of delays, changes in management, unforeseen price increases, and even factory closures.
Trust and confidence are big factors in helping speed up the product development process, ensuring products are launched on time and on budget. The peace of mind in knowing your EMS is only a short journey away is something you just can’t put a price on.
Economic Benefits
Reshoring EMS can also have positive economic effects. It creates jobs and stimulates local economies, which have a
positive effect on other industries. It can also help to reduce the trade deficit by increasing exports and decreasing imports. Furthermore, reshoring EMS can help to improve the image and reputation of the OEM.
By bringing manufacturing operations back home, the OEM can demonstrate its commitment to quality, innovation, sustainability and British excellence.
Reshoring EMS is driven by several factors, all linked to uncertainty. These include fluctuating exchange rates, supply chain risks, time-to-market pressures, and the need for advanced manufacturing technologies and materials.
While there may be challenges associated with reshoring EMS, the benefits far outweigh any drawbacks. Ultimately, reshoring offers OEMs more control; and in today’s turbulent times, the peace of mind knowing your EMS is there when you need them is something you can’t put a price on.
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References:
Hale, T. and Hille, K., 2022. Shanghai lockdown stokes global supply chains anxiety [online]. Subscribe to read | Financial Times. Available from: https://www.ft.com/content/368121b2-5e44-4393-9ff8-f5b4fc40ba2b [Accessed 26 Apr 2023].
Martin , Haskell, and Jonathan Haskel Imperial College London View Profile , 2023. How has Brexit affected business investment in the UK? [online]. Economics Observatory. Available from: https://www.economicsobservatory.com/how-has-brexit-affected-business-investment-in-the-uk [Accessed 26 Apr 2023].