Flextronics International Case

Flextronics International, Ltd.

1. FLEXTRONICS AND EMS INDUSTRY:

EMS industry:

Electronics manufacturing Services also known as contract manufacturing (CM), describes companies that provide electronic design services, supply-chain management, manufacturing, test, distribution and repair services primarily of electronic components, sub-assemblies and finished products. Increasingly contract manufacturers are integrating sub-assemblies manufactured by multiple suppliers including other CMs. With increasingly complex supply-chains the attributes of a CM you choose to assist with manufacturing or repairing electronic components, become more important including the CM's professionalism, timeliness and results. Businesses often work together to supply parts and manufacture products. When a company is on a deadline, it is important that the deadlines be met. It is not a matter of convenience, but of necessity. A company may need a part or component in order to meet their deadline, but if their supplier has not sent the part it can lead to serious problems. Companies can avoid this issue by searching for businesses that have a reputation for timeliness. When considering a new partnership, ask for the company for its delivery policy and policy if deadlines are not met. Knowing this information ahead of time can help a company choose the right electronic manufacturing services. For most companies, the bottom line is dependent upon results. Can an electronic manufacturing service deliver what the client paid for when it was promised? A business trying to find a new EMS firm will want to identify firms that are results-oriented. Companies with a good reputation among their peers and customers will focus on results. Conversely, it is a safe bet that either a company with a poor reputation does not get desired results or they do not conduct business in a professional manner.

Advantages of EMS in Flextronics:

Through electronics manufacturing services (EMS) and original design and manufacturing synergy, Flextronics offers customer-centric solutions to the global automotive industry. Flextronics combines the advantages of a dedicated environment with the benefits of materials sourcing strength, process standardization, and the stability that comes from being an industry-leading EMS provider to offer world-class automotive solutions. From concept to volume production, they work closely with the customers to maintain a focus on product excellence and supply quality. With more than 15 years of experience in automotive EMS, they create value that increases customers' competitiveness through:

Extensive service offering and product portfolio

Global footprint to support global launches and local for local manufacturing

Product lifecycle planning aligned with APQP and VDA

Global validation capabilities and test labs to support product validation and customer approvals

Strong material purchasing position

Global account management services

2. RATIONALE FOR EMS INDUSTRY:

The rationale for the existence and growth of the industry is summarized as follows:

Economies of scale: A product often experiences cyclic demand. If an OEM decides to have in-house production and designs its capacity to satisfy peak demand, there will be excess capital resources and labor during downturns in the demand. A CM is likely to be able to shift the excess capacity allotted to one OEM customer to another.

Core competency: With increasingly severe competition amongst OEM's, it is important to sense what new product consumers want, and to design and build the product quickly. It is difficult to excel at all of these. An OEM's core competencies are typically in new product design and demand generation. By outsourcing manufacturing activities, electronics OEMs can devote their attention to design and demand creation.

Low material cost: With EMS providers growing bigger, they have more leverage in purchasing raw materials. Purchasing power due to increased size and shared inventories of common parts can result in lower component costs

Return on investment: Manufacturing processes often require heavy capital investment, which often takes a long period to pay back. With shortened product life cycles, it is harder to make capital investment decisions. For an OEM, these difficult decisions are removed if the CM takes care of the entire manufacturing process, resulting in better return on investment for the OEM.

Time to market pressure: With shortened product life cycles, being first to market is extremely important. As building new manufacturing capability often takes time, a CM can provide manufacturing capacity and expertise quickly.