The Power of Co-Creation: Build It with Them to Boost Growth, Productivity, and Profits by Venkat Ramaswamy & Francis J. Gouillart

Author:Venkat Ramaswamy & Francis J. Gouillart
Language: eng
Format: mobi
Publisher: Free Press
Published: 2010-10-04T18:30:00+00:00

Expanding Stakeholder Relationships in the Ecosystem

Jabil Circuit has evolved from its original position as an arm’s-length contract manufacturer and is now tapping into the power of collaborative interaction, yet it could still do a lot more from a co-creative standpoint. Jabil further illustrates that the co-creation principle can be applied at highly operational levels within an ecosystem.4

Contract manufacturing traces its roots to the mid-1970s, when several companies began printed circuit board assembly. Today, the electronics manufacturing services (EMS) industry offers numerous manufacturing services, including product design, supply chain management, global distribution and logistics, and repair services. Typically, their business customers, the so-called original equipment manufacturers (OEMs), retain ownership of product designs and brand names while also pursuing aggressive cost reductions and profit improvements. As electronic product life cycles shorten, fast time-to-market has become increasingly critical for EMS companies.

The contract manufacturing industry grew to more than $300 billion in revenue in 2009. It is dominated by Tier 1 companies (revenues exceeding $1 billion), including Flextronics International (which acquired Solectron), Celestica, Sanmina-SCI, and Jabil Circuit. These five companies alone account for more than half of the total market revenues. The smaller contract manufacturers (Tier 2, with revenues between $250 million and $1 billion, and Tier 3, with revenues less than $250 million) have traditionally carved out niches by providing great customer service and quality management.

In the conventional ecosystem of electronics, a big EMS company has thousands of components suppliers on one side and hundreds of customers on the other side. It is difficult for suppliers to have much bargaining power, as electronic components have largely become commoditized. Most OEMs retain some in-house manufacturing experience, which gives them a clear picture of the cost and profitability of EMS companies. This allows them to dictate prices and puts extreme pressure on the EMS companies to streamline the services they offer. OEM customers gain additional bargaining power over EMS companies from their ownership of brand names, product designs, and marketing channels.

Facing these competitive pressures, EMS companies have recognized they cannot survive by limiting themselves to the traditional manufacturing services. Over the last decade, EMS companies have moved toward fulfilling almost every aspect of the manufacturing supply chain. They have become integral partners in the product development cycle by adding expertise in areas such as front-end design, full system assembly, repair and warranty service, and logistics. As a result, the points of interaction between EMS and OEM companies have changed. The main interactions used to take place at the end of the value chain, when EMS companies provided the finished products. But as the EMS companies have gotten more involved in R&D, repair and warranty service, and logistics, their interactions with their customers now take place much earlier in the process and can involve any point in the system.

Jabil Circuit, based in St. Peterburg, Florida, offers manufacturing and supply chain solutions to electronics and technology companies across a broad range of industries, including automotive, computing and storage, consumer, defense and aerospace, instrumentation and medical equipment, telecommunications, and networking products and peripherals.

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