Electronic Product OEMs Seeing the Real Value of Full Service Partners in Uncertain Times

Staring at an “unusually uncertain” economic outlook in the US and deep spending cuts and write-downs in the Euro area (although industrial production data appears to be moving the in right direction) one would expect OEMs to show some short term price-driven thinking to how they are approaching their supplier relationships.

A recent survey by Riverwood solutions of senior OEM ops and supply chain professionals shows the opposite: only 14% of respondents (down 30% Y/Y) are looking at product cost as a top concern in measuring their electronics equipment partner and conversely, nearly 50% of respondents are willing to pay more for higher quality (up ~12% Y/Y).

While the aforementioned article focused more on supplier responsibility and its impacts to Chinese ODMs, I came away with a slightly different perspective on the data. The results confirmed what we’ve been hearing from our customers this past year: that value is important and that they are looking to gain a competitive edge by rationalizing cost across their operations. In other words, it does not begin and end with a procurement decision. Instead, OEMs are in search of PARTNERS that can help them control total cost and improve execution throughout their value chain.

Case in point, we recently announced an agreement to supply Siemens Healthcare with a long life workstation to power their ACUSON SC2000 volume imaging ultrasound system. What may sound as simple as a product decision was really a strategic one for this customer that was looking to streamline engineering, services and support functions by recognizing eventual downstream costs related to recertification and service strategy.

I also witnessed this first-hand with customers in Japan last week. I was in a meeting with at well known global electronics company looking for alternatives beyond their traditional contract manufacturing relationships. The customer was reviewing their next-gen design alternatives for a high-volume retail device, with an eye towards entry into the booming (yet completely foreign to them) Chinese market next year. They were grappling with the challenges related to their traditional custom design-oriented approach as well as the need to be more flexible in their operations and services model. We discussed how sensible trade-offs can be made by building x86 off-the-shelf technology into their design thereby adding a supply partner that can: help to them go-to-market fast, improve quality, enhance their support model and more easily extend their reach into new markets… all while maintaining their product brand and maximizing end-user experience.

In all, it looks like good news ahead for IT suppliers that offer a value chain orientation to meeting OEM customer need. Looking forward to seeing the full report from Riverwood soon.

About the Author: Josh Kivenko