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April 2001

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Subject:
From:
Ed Valentine <[log in to unmask]>
Reply To:
Ed Valentine <[log in to unmask]>
Date:
Mon, 23 Apr 2001 21:36:30 -0400
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Hey Steve - Dell is now ahead of Compaq!

As you mentioned, your question about OEM outsourcing can be very big and
complex or, in some cases, it can be a relatively straightforward decision.
It all depends on the company and its unique circumstances and requirements
at a given point and time, and where it is headed. There is no cookbook for
all the answers.

Sometimes, it makes sense for an OEM to contract out virtually everything,
including the design to an EMS. At other times, some or all of the core
competencies are better retained and controlled within the OEM, with only
some or none of the manufacturing contracted out. For example, in some
highly competitive markets, some factors like design security, unique
processes and components, time-to-market, government regulatory inspections
& requirements, and a host of other factors may enter into the equation.

At other times, it may be a matter of product volume, as you mentioned. Do
you really want to be a little fish in a big pond? Who do you think gets the
priority when push comes to shove? For low volume manufacturers, it usually
makes more sense to be a big fish in a little pond. But then does the small
pond have all the resources you need? As you know, there are no simple
answers. Generally speaking, its a matter of tradeoffs. And, as in all
decisions, what are you willing to live with and what can you live without?

As far as a dollars-only answer, that is usually the most common, but wrong
approach since it normally is based on short-term benefits. These short-term
benefits are rarely weighed against the long-term survivability of the
company. Costs are an important factor, but not the only factor (unless you
only talk to Accountants). Being more competitive is really more important.
Where is your company and its products and services (remember Customer
Service?) going to be five or ten years from now? What are the goals? If you
don't know the goal (or target) you are aiming for, how are you going to hit
it? And I don't mean just financial goals which are, at best, more wishful
thinking than action, if you don't have strategies to meet them, you won't.

Well I better cut this short and let all the others get their two cents
worth in. see 'ya.


Ed Valentine
Electronics Manufacturing Solutions
8612 Mourning Dove Road, Raleigh, NC 27615
Phone: (919) 270-5145, Fax: (919) 847-9971
Email: [log in to unmask]
Website: http://www.ems-consulting.com

----- Original Message -----
From: "Stephen R. Gregory" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Monday, April 23, 2001 8:25 PM
Subject: [TN] Loaded question...outsourcing vs. in-house manufacturing...


> Hi All!
>
> I've was asked by one of our sales people if I could give some information
on
> why it makes sense for an OEM to outsource assembly vs. starting your own
> manufacturing capabilities. Obviously, this deals with printed circuits...
>
> I've done a lot of searching, and have some good info, but I thought I
would
> ask you all for your opinions to add to the mix...
>
> Generally, the reasons I've found come down to dollars, and core
compentcies.
> That is, a company may be very good in designing products, but lack the
> facilities to produce the products they design efficiently. Where is the
line
> that you decide to invest the capital in automation, or doing the
> manufacturing yourself to produce what you've designed, or just simply
> outsource it?
>
> I know this is a very ambiguous question, a lot depends on product volume,
> complexity of assembly, and a million other factors...
>
> One of the big examples I've found on the NET is Compaq computers, once a
OEM
> making everything themselves, practically everything is outsourced
now...they
> shut-down a beautiful manufacturing facility in Texas...but, they went
from
> almost falling behind Dell, to surging ahead to #1 in PC suppliers and
> turning a profit...
>
> Just interested in your thoughts...
>
> -Steve Gregory-
>
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