Contract electronic manufacturing makes sense for the SME

Offshore Electronics’ Managing Director Steve Marshall explains how a contract electronics manufacturer (CEM) can bring both financial and technical rewards for small companies, and offers advice on selecting an appropriate CEM partner.

The service provided by CEMs is often regarded as the exclusive province of large client companies. While large multi-national clients certainly do make use of CEMs, increasingly the bulk of this business is with small and medium sized enterprises (SMEs) that either lack the necessary expertise in-house or have no plans to incorporate this specialist activity into their businesses.

Like all original equipment manufacturers (OEMs), both big and small, the entrepreneurial SME must comply with a wide range of product related manufacturing regulations, and this can be a huge challenge for a small design-led company with limited resources.

With a CEM as a manufacturing partner, an OEM is able to leverage the former’s deep pool of expertise, gaining advice on such issues as design-for-manufacturing and ensuring that a product is manufactured correctly and efficiently using industry approved components and processes.

Working with an experienced CEM should also bring economies of scale for the smaller OEM. A CEM’s wide customer base confers considerable purchasing power, meaning that better pricing can usually be achieved across common components where volumes impact costs.

So far, so good, but how does an OEM with little experience of the CEM market go about selecting a manufacturing partner in which they can place trust and who is likely to bring added value to their business?

Actually, ‘trust’ is a key word here. One hurdle that smaller firms and design teams need to overcome is the fear of losing their intellectual property (IP). To them, their IP is everything – and the last thing they want is for it to be copied, or to have designs and technology stolen. It’s a very real fear, so they must be confident that a manufacturing partner is honest, trustworthy and has no conflicts of interest.

A trustworthy contract manufacturer will undertake due diligence and always consult with their customers to ensure that there is no conflict of interest, declining business from a potential customer who would compete in a similar market to an existing client. Additionally, study a potential CEM partner’s attitude towards your company: are their people making an effort to get to know you, your company and the market you serve?

Perhaps the best advice to an OEM seeking a CEM partner is to start small. Develop the relationship from simple beginnings – just a few assemblies for a new product or a small pre-production batch to prove the CEM’s capabilities. From this initial contact and first manufactured product, the CEM would look to develop a mutually beneficial relationship, gain the trust of their client and become a manufacturing partner of choice. And as this partnership develops, a CEM might take on greater responsibilities in terms of re-work, re-designing products for automated manufacturing and test, improving product reliability and taking out unnecessary cost as a function of the partnership.

While small firms may initially hesitate to appoint a contract manufacturer, particularly if they are coping with production by themselves, the greater efficiencies that an experienced CEM can bring – the economies of scale, testing expertise and rigorous approach to production – can lead to significant cost savings and vastly improved product quality.

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