Timing is everything

In the EMS industry, as the current economic slowdown starts to bite, the conservation of cash has become a greater priority than profitability itself. As market uncertainty continues to deepen, suppliers and customers alike are reducing inventories with the objective of conserving cash. Rather than working to conserve cash Dynamic-EMS has developed strategies to make its revenues work harder. This situation has two major impacts, both positive and negative, on the EMS industry. Firstly, as stocks reduce, it is likely that there will be a negative impact on time to market. Conversely, while inventories have constricted, this constriction has been slower than the constriction in demand. What this means is excess inventories at OEMs and EMS providers, putting them in a positive position when the market turns. However, this is not the first time that EMS providers have seen a slow down in the market place and survived. The end of the telecoms boom at the turn of the Millennium had a critical impact on those EMS providers who ignored the theories of marketing mix and single market concentration to their detriment and who then saw their turnover, profitability and businesses turned upside down almost overnight. It used to be that the key to long term success for EMS providers in ever changing markets was to: diversify the customer base to ensure it includes industries with differing upturn/downturn cycles; follow a business model that focussed on decreasing time to market; and optimise those processes that continue to be – and always will be – in demand. Despite many organisations operating in survival mode, customer service and responsiveness will never go out of style. But they become more important when demand is increasingly variable due to economic uncertainty. To that end, the generation of an organisation's 'value proposition' is paramount. In a market place where pcb assembly is a commodity and 'value is in the eye of the beholder', Dynamic EMS is working towards developing a business 'ecosystem' aimed at identifying organisations that require a tailored value proposition that meets their particular needs. That is not to say that the systematic approach to identifying targets through market segmentation (situation analysis), targeting and positioning is not important, while working to reduce exposure to single market concentration. However, it is more important than ever to identify organisations that require tailored value add propositions. The objective of this business 'ecosystem' is to deliver the correct business at the correct cost to the correct customer. From a supply chain perspective, EMS companies need to collaborate with supply chain partners to provide customised, flexible, integrated supply chain solutions that they can buy into. It is imperative to the success of the 'ecosystem' that Dynamic-EMS works with suppliers who can provide leading supply chain capabilities and integrated services tailored to meet the needs of its customers. By presenting a unified supply chain that is adaptive and responsive to continuous change, we can help our customers to stay ahead in an increasingly competitive market. Success is also dependent on optimised communications between all stakeholders, including suppliers and customers. From the initial supply request through to the final shipment, materials planning has to be one of the most tightly managed processes – with all parties collaborating to get the materials needed, when they are needed. In order to offer competitive pricing, supply flexibility and reduced inventory risk, Dynamic-EMS benchmarks the market continuously, staying on top of prices, lead times, component availability and technology trends to maximise the impact of working capital. From the customer's perspective, pricing strategies will differ greatly, depending on the type of product and market, with the chosen pricing strategy impacting directly on cost and financial performance. Pricing levels must meet the financial targets of the company while at the same time offering a competitive price in the marketplace. Balancing these requirements requires careful analysis at an appropriate level of detail. From an inventory perspective, many EMS companies experience low inventory turns, but relatively poor customer service levels. This is especially true when there is a high mix of products and component lead times are long or fluctuate heavily. The optimal positioning of inventory in the supply chain triggers a significant performance upturn by improving customer service levels and increasing supply chain velocity. Such an improvement has a major impact on the financial performance of the company. The key to a successful business ecosystem relies not only on relationships with strategic supply chain partners, but also on the complete 'supply web'. The web is essential to identifying mutually beneficial business relationships that creatively deliver value add to our customers and, subsequently, our customers' customers. However, it cannot be forgotten that sometimes the greatest value lies outside the business services offered. The greatest value may indeed lie in the intangibles, such as the relationship the customer has with the sales team, the ease of interface for purchasing the services offered, the responsiveness and flexibility of the organization, the trustworthiness or integrity of the sales person and the performance of the company in meeting its commitments. Does the company 'do as it says on the tin?'. Developing, communicating and delivering value requires a real understanding of what the customer seeks to accomplish, the roadblocks they face and, ultimately, what is important to them in terms of the business relationship. It is the role of the sales organisation to take interested potential customers and develop value propositions that fit the customer's particular needs. In doing so, the proposition either saves the customer from massive pain or creates massive pleasure, preferably both. This 'supply web' is the basis for the success of the business 'ecosystem'. Dynamic-EMS enables organisations to join this web and become part of the ecosystem through collaboration. This supply web can include design consultants, distribution partners, venture capitalists, the banking community, personal networks and government bodies – all with the objective of developing mutually beneficial business relationships. It is Dynamic-EMS' aim to ensure that all participants understand what it is that the company offers to the marketplace in terms of the delivery of 'the correct business at the correct cost to the correct customer'. This means businesses are able to achieve new levels of cost containment, time to market and long term sustainable competitive advantages.