The Barons of Outsourcing Electronics manufacturing services (EMS) companies don’t make their own brand-name products Factories designed to be quickly re-arranged – can make different products for many customers, can run at capacity most of time Core competency is manufacturing, don’t have to worry about R&D or marketing Can get cheaper components through volume Low gross margins, respectable ROE To broaden services, some contract manufacturers acquiring design and engineering firms, parts suppliers, distributors Move into design raises interdependence issues
Limits of the New Corporation Can outsource effectively if one possesses what economists call “perfect information” Know which attributes need to be specified Technology to measure those attributes must be reliably accessible If any variation in what supplier delivers, need to know how it will interact with other elements of system Unlikely when new technologies are emerging