Innovating beyond the speed of consumer demand
Pendulums often swing between extremes before settling on equilibrium; and, so it has been the case with the electronics supply chain. Nearly two decades have passed since there’s been a major disruption: when original equipment manufacturers (OEMs) opted to relinquish control of the manufacturing of consumer devices to a new set of suppliers that provide manufacturing services. The move swung the pendulum between extremes that transformed it into today’s highly complex, global marketplace.
The shift sent the industry in a better direction with increased efficiencies and manufacturing costs, but with it were a new set of challenges. With reports of a lagging market, and tech-obsessed consumers demanding innovation, OEMs are seeking a smarter, faster and better way to move from product concept to consumer. OEMs are realizing that they must speed up the product development lifecycle and that they require constant innovation in order to meet the demands of retailers and consumers. As a result, they are looking for the equilibrium – or the right balance – that enables them to gain more influence and control over the product development lifecycle, while leveraging the ingenuity of the supply chain that supports their current manufacturing suppliers.
Setting new expectations
Finding the equilibrium that enables OEMs to innovate faster and stay ahead of consumer demand is driving the newest disruption to the electronics supply chain. With the resources required to fuel the disruption now available, the change will happen sooner than you think. Already, OEMs are experiencing the results of this new model and are starting to expect more, thus swinging the pendulum further towards equilibrium. The new model – dubbed the “eco-system approach” – gives the OEM the opportunity to have influence deeper into the supply chain by reaching past their manufacturing suppliers to directly involve the supply chain. With this direct line of communication, OEMs can task the supply chain to proactively innovate on their behalf to speed up innovation as well as the product development lifecycle.
Being able to supply the total package is not something the manufacturing suppliers are able to do without direct involvement from the eco-system.
Here’s how the eco-system approach works: As the OEM reaches into the supply chain (that provides products and services to the manufacturing partner), they present design challenges that are defined at the systems level. This forces the supply chain to expand their knowledge past what they sell and requires them to be able to interact and provide knowledge past the product or service they provide. To do this, the supply chain interacts, in concert, as independent groups within the supply chain that span from materials, components, adhesives, PCBs, manufacturing equipment, etc. In addition, they also act interdependently with others in the supply chain, with the intent to innovate proactively on the OEMs behalf. The shared knowledge enables the supply chain to direct their research and development resources towards future innovation since they can now access actual demand, thus allowing the OEM to innovate faster.
“Being able to supply the total package is not something the manufacturing suppliers are able to do without direct involvement from the eco-system”
In addition to the new benefits for OEMs, the supply chain is rewarded by having a direct audience with the OEMs to collaborate at a systems level, rather than at the supply level (e.g. materials and equipment). The OEMs’ manufacturing suppliers also come out ahead in the eco-system approach. They benefit through streamlined knowledge sharing which leads to increased yields using fewer resources. Ultimately, the eco-system approach places influence back into the OEMs’ hands, speeding up the innovation process.
Through the eco-system approach, the supply chain is becoming smarter about how to structure their business operations to better navigate and optimize the complex eco-system. At the same time, OEMs must understand how to harness their power and best utilize their influence in this dynamic new world.
Harnessing the power of collaboration and supply chain ingenuity
To take advantage of the eco-system approach, OEMS need to figure out how to reach beyond manufacturing suppliers and influence the broader supply chain. The move requires a willingness to interact with the supply chain despite not having done so in the past and an understanding of the highly complex global supply chain. OEMs must also understand how they can leverage their resources – manufacturing suppliers and supply chain.
To help better understand the complexities of this new approach, consider that the electronics industry has its own eco-system with respect to where the product life cycle lives. In the electronics product eco-system, development starts with an idea of a new product and goes through many stages from the initial idea, until the product is in the hands of the consumer. This includes prototyping, new product introduction, product launch and production. The developers of the product interact across all corners of the globe and across multiple companies in order to produce the electronic device. This eco-system is very dynamic due to increased consumer demand for smaller, lighter and more functional products. In order for the eco-system to yield optimum results, it must draw from the expertise that exists within the eco-system, from all over the world with developers of the product working together to leverage expertise and facilities. Since the eco-system is global, there is a need for the right level of customer support to be located in the right regions of the world.
Through this model, the eco-system requires the manufacturing supplier to interact with both the OEM and the supply chain in order to accomplish the goal of improving the supply chain. Knowing that the entities that make up the supply chain are independent from each other as well as from the manufacturing supplier, members of the supply chain need to leverage their resources – of knowledge (materials, processes and equipment) and infrastructure – to ensure the whole solution from the concept phase to the consumers’ hands is successful, and not just their part. Under the eco-system model, while members of the supply chain are interdependent, no one – OEM, manufacturing supplier or other supply chain members – gets to the next stage unless they all do it together.
“Consider that the electronics industry has its own eco-system with respect to where the product life cycle lives”
To illustrate the dynamic model, imagine a scenario where consumers are demanding larger viewing screens on their mobile devices but they also want them to be thinner and lighter weight. That’s not so hard to imagine, right? As it stands today, no materials alone exists to make this possible. Now consider what happens when an OEM reaches deep into the supply chain (past their manufacturing supplier) to engage one of the supply chain members who has the knowledge and infrastructure to navigate the eco-system. The move forces collaboration between those in the supply chain who specialize in 3D stacking of components including adhesives, components, printed circuit boards, materials, assembly and packaging suppliers. Together, through shared resources and knowledge, the supply chain holds the ingenuity to define and develop the new materials needed that make this electronic device possible.
A better way to create: benefits of an eco-system approach
OEMs are just beginning to understand the opportunity that exists within a new eco-system approach for the product development li
fecycle. On the surface, it means designers will have more options to innovate faster. And, with the power of collaboration between suppliers in the eco-system, OEMs will enjoy better advancements in technology for their products in a compressed timeframe, enabling a competitive advantage in an already highly competitive marketplace. The approach will also simplify and speed along the process up front. And suppliers with the infrastructure to offer the full lifecycle approach will be able to satisfy the OEMs needs in a condensed timeframe.
With the new eco-system supply chain model in mind, OEMs are beginning to look inward and asking: Can I afford to keep doing what I’m doing? What’s the best way to innovate beyond my manufacturing supplier? How can I interact and influence the larger eco-system? At the same time, they are starting to challenge the supply chain by asking a new set of qualifying questions: What can I expect from my supply base and their supply chain? Are they global? Do they need process knowledge of materials, equipment and advanced packaging technologies? Do they have facilities to support the development of technology as well as on-site production support? Are they aware of the eco-system and how its parts interact?
Manufacturing suppliers and supply chain members who are able to offer OEMs this type of eco-system support will be the glue that holds everything together in the new electronics product development lifecycle. And the equilibrium will once again enable OEMs to heavily influence the manufacturing process, speeding up innovation.