I had a chance to visit an amazing electronics contract manufacturer this week and it made me realize that they have the right business model but the industry is broken. It isn't that most CMs are bad businesses, it's that their objectives are misaligned with their customers. Most CMs want to purchase components for their customers because it increases top line revenue (and some bottom line) in order to make the business look bigger. But if the core competency of these companies is in manufacturing and assembly and not supply chain, why are OEMs cedeing control of that crucial part of their business. This particular EMS reached out to Cofactr because a mutual customer told them about us. They prefer to work on consignment because, again, it allows them to focus on what they are really great at. If OEMs were to retake control of the procurement of their electronic components, I am convinced the industry would see an increase in productivity. OEMs would be able to lower their cost per unit while also avoiding supply issues due to shortages or long lead times. CMs could focus on assembly of PCBs without the distraction of procuring and storing inventory. Turn time would decrease. The challenge is a world that rewards all increases to revenue and profit as equal as opposed to efficiently putting capital to work to maximize returns.
Alex Malcoci
9 mnd
Amen.
And if you want to know who the amazing CM is that we met with, send me a DM and I'll be thrilled to make an introduction for you.