East West Manufacturing Blog

Contract Manufacturing Trends to Watch for in 2017

Written by Patty Rasmussen | December 15, 2016

If 2016 has taught us anything it’s that making predictions can be tricky business. Who knew at the beginning of the 2016 baseball season that the Chicago Cubs would win the World Series?



Nevertheless, we are going to wade into the prognostication pool to add our thoughts on what to look for in contract manufacturing in the coming year.

To do so, we looked back at a blog post we published this time last year, 3 Contract Manufacturing Industry Trends to Plan for in 2016, and a follow up piece published in July, 2016 Contract Manufacturing Industry Trends Update -- Were We Right?

The two posts highlighted the following three trends:  

Ubiquitous IoT – Further proliferation of connected cars, houses, cities and a multitude of other “things” combined with the necessity of managing, storing and securing data, then putting that data to good use.  

Vendor Consolidation – Even with helpful technology, fewer suppliers are easier to manage than more, and one size solution doesn’t apply to all.

Replacing Suppliers With Partners – As last year’s post pointed out, “a partner creates more value than a supplier.” Becoming a partner to the OEM you serve means becoming an extension of their team by investing in the tools to help them win their race.

The Envelope Please

We believe that 2017 will see those trends continue to play out, especially the widespread emphasis on robotics, and we asked our founders – Scott Ellyson and Jeff Sweeney – whether they saw any others looming on the horizon.

Both agreed that the three trends from 2016 were still valid today. Scott suggests contract manufacturers will place an increased focus on risk management.“There is a lot of uncertainty out there and I think a lot of companies are thinking hard about supply chain stability,” he said. “This will result in supply chain redundancy and contingency plans that protect against downside risk.  This will only accelerate movement of manufacturing to variety of regions, including both the US and Southeast Asia.”

During the recent US presidential campaign, the airwaves were filled with trade demagoguing from both sides of the political aisle. Everyone running for president seemed to believe that trade is zero-sum, that somehow a job created in China is a job lost in the US, and that trade deals require winners and losers rather than win-win partnerships.

Not so, said Jeff.  “The idea of trade, properly executed, as not being a zero-sum game, is as important as ever,” he said. “It is also core to our business model—i.e. we make our customers, most of whom are manufacturers themselves, more competitive and thus allow them to actually grow their presence.”

Both Jeff and Scott agree that right-shoring, making a product in the place that makes sense for reasons beyond merely financial, is a commonsense approach to manufacturing and should be one that receives more attention in 2017.

“For example, it is great that Carrier is not completely closing that facility in Indiana and hundreds of furnace assembly jobs are remaining in the US,” says Jeff citing the well-publicized (and politicized) decision. “I would also venture to guess that many of the line items on the bill of materials (BOM) for those furnaces, like the motors, are made in China or Mexico. By right-shoring the motor from the most competitive places, the furnace in turn is more competitive.”

You don’t need a lesson in market economics from me, but I would also point out that while innovation and technology can cause the loss of jobs in the short term, over the long haul, companies that innovate create new jobs – often better paying jobs. Incumbent workers must be willing to up-skill or re-skill, or else companies may have no other choice than to relocate. That might be to another state, it could be to another country. The skills gap is real and blaming willing workers in other countries isn’t going to solve the problem. Perhaps something we can all agree needs to happen in 2017 is a real, practical alignment of workforce education priorities on the part of government, business and workers.

Predicting the future is a tough business, but we’d love to hear what you have to say about 2017. What trends do you see in your contract manufacturing business, and how are you planning to come out on the other side with more business, not less? Let us know in the comments section below or Tweet to us @eastwestmfg.

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