Tips for adjusting to changing customer forecasts.

The EMS industry is running true to a cycle no one likes: big drops in demand following a period of inventory buildup. The drivers for inventory buildup were material constraints and unpredictable spikes in demand following the Covid lockdown period. OEMs increased both raw materials and finished goods in their desire to stay ahead of parts shortages and customer spending sprees. Unfortunately, our heated economy is finally slowing. While consumer spending has remained strong, they are tightening their belts on big purchases and purchasing fewer discretionary items.

As a result, electronics manufacturing services (EMS) providers are seeing a different set of issues than they have been dealing with the past two years. Material inventories are still high and forecasts are dropping as customers slow down new orders to burn off existing finished goods inventories. How do you counter these challenging trends? There should be three areas of focus:

Are your internal processes or actions creating bad word of mouth?

Years ago, I went to a communications conference in Chicago where a Japanese quality executive discussed the reason behind Japanese companies' relentless pursuit of quality. He said it all boiled down to word of mouth. Japan's cities are densely populated. Residents use mass transit and live in apartment complexes. This executive said their studies had found that when a domestic consumer had a bad experience, they were likely to tell at least 10 people on their way home from work. Having lived in Japan, I agree with that assessment and that imagery remains in the back of my mind.

The internet has exacerbated this phenomenon. Recently, I had a client who was looking for lead database options. Other clients had said good things about a database they were using, so I did a search and came up with two options: the one with positive word of mouth and a much cheaper option with good online reviews. The first vendor I contacted required watching a demo to obtain pricing and details. Their salesperson ultimately discounted the annual price based on the low volume lead search needs of my client.

The second vendor shared pricing info and service descriptions on its website, no demo required.