Obsolescence Insurance, a New High-Margin Business for EMS Companies
by 
Capturing market share away from one’s known competitors is a time-honored growth strategy for most businesses, particularly when the market is flat. But if a company is too focused on defending its turf, executives say, it runs the risk of not seeing new competitors coming.
Verical.com’s Chief Digital Officer and President Matt Anderson recently told Forbes magazine “… if you pay a lot of attention to the businesses in your space that your business unit presidents or geography presidents talk about a lot –and certainly you should do a little bit of this —you’ll miss your real threats which are new entrants that will come in and develop new capabilities, or new business models or build Internet audience and begin to steal brand share from your company online.”
Online isn’t the only source of competition, although the barrage of dot.coms in the early 2000s sought to unseat the traditional model of electronics distribution. Most recently Amazon.com unveiled its b2b marketplace, AmazonBusiness, which sells electronics components. The reaction within the distribution industry has been mixed. AmazonBusiness might be a price leader, but it may not trace the origin of components as thoroughly as top-tier distributors. Amazon.com has redefined the way retail shopping is conducted; the jury is still out on Amazon b2b.
The other source of competition in the electronics supply chain comes from companies that are also customers of distribution. Electronics manufacturing services providers (EMS) often source the components that their OEM customers spec on their bill of material (BOM). EMS companies can often combine OEM orders so they can procure common components—most often commodities—for a significant volume discount directly from suppliers. This helps offset the razor-thin margins – estimated at roughly 5 percent – EMS companies get for manufacturing services alone.
This blog was originally published on Verical Connect. To continue reading, please click here.
Related posts
