As a business activity, the term outsourcing refers to an agreement on the basis of which a company agrees to contract-out a portion of its existing internal affairs to another company. It is a form of partnership that results in a company opting to transfer a part of its services to third-party service providers. On account of outsourcing, goods belonging to a particular business enterprise are obtained, on commercial terms, from outside or external vendors. With regards to the prospect of electronics outsource in India, it must be noted that the entire process of manufacturing electronics is a rather complex one; original equipment manufacturers (OEMs) in India were historically driven by an urge to take advantage of new outsourcing opportunities as part of a business strategy, with the promise of enhanced performance levels and reduced operational costs. Hence, they went in ‘arm’s length’ contractual relations with electronics manufacturing services (EMS) companies in an effort to outsource their electronics manufacturing activities.
Numerous benefits of outsourcing electronics manufacturing persist from the perspective of an original equipment manufacturer. OEMs are bound to implement a successful outsourcing strategy, thereby enabling them to study not only their present financial status but also the transparency of their forthcoming goals and objectives. Be it on the contract-by-contract basis or product-by-product basis, upon outsourcing electronics manufacturing, OEMs receive quality ISO certified products from an EMS company, on account of the latter’s dedicated assembly and manufacturing lines. Getting associated with a trustworthy electronics manufacturing company ensures good rapport with consumers, thereby sustaining loyalty among its customer-base in the long run. EMS companies enable OEMs the possibility of delivering products of the highest standard into the market on a tight schedule. The cost of setting up individual assembly facilities coupled with the prospect of suffering from capacity constraints can also be vanquished significantly.
No matter how well documented its advantages might be, the concept of electronics outsource in India has its fair share of risks and concerns. When OEMs outsource electronics manufacturing without initially involving its HR department, major staff implications are created. Degradation in product quality is witnessed if the EMS companies do not possess the requisite manufacturing experience. Hidden costs and legal problems also surface if the terms of outsourcing were not properly defined initially.
