Global Electronics Firms Revising Supply Chains

MENLO PARK, Calif.—Managed supply chain services provider Riverwood Solutions indicated in its March 2009 survey of electronics products that OEMs showed concern over the viability of supply chain partners.

Respondents spent more than $150 million in the global electronics supply chain in 2008, says Riverwood Solutions. Many are considering strategic operations alternatives–such as relocating outsourced production to different geographical regions or partners–to address the heightened need to further reduce costs in this challenging environment.

Key findings include:

* 69% of OEMs believe that supply chain management can be a source of competitive advantage for their company, while just 31% believe that their supply chain is actually more nimble than that of their competitors.

* 53% of companies plan to geographically relocate at least some of their outsourced production in the next two quarters, while fully 50% plan to move some production to another EMS provider during that same period.

* 31% of OEMs report being “Very Concerned” that their EMS provider will be unable to meet their delivery commitments in the coming year based on financial difficulty, while less than 2% of respondents report being concerned that their EMS provider may be acquired by another company.

“The results of Riverwood Solutions’ OEM survey are consistent with what we are hearing from current and prospective customers,” said Courtney Ryan, senior vice president, Global Business Units at Jabil. “OEMs continue to seek opportunities to reduce cost and improve competitiveness–but with a renewed focus on the supply assurance and financial stability of their EMS partners. EMS providers with sound financials, strong service offerings and the right geographic footprint will clearly be the beneficiaries of the economically induced sentiment evidenced in the Riverwood data.”

“The current and unprecedented economic environment will create not only serious dislocations but also tremendous competitive opportunities in the electronics supply chain over the next few years,” said Ron Keith, COO, Riverwood Solutions. “Difficult economic times often create the catalysts for dramatic shifts in the way companies do business. While many OEMs will simply seek to reduce their exposure to supply chain risk and sharpen up their execution, others are looking for entirely new ways to manage their outsourced relationships.”

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