Supply Chain Resources Group, Inc.

In this, part 2 of evaluating #CM fixed assets distribution, we look at $26B Flex (formerly Flextronics). Flex was one of the earlier movers into contract manufacturing in #China in the late 1990s and early 2000s.  By the early 2010s, production in China peaked at about 38% of the company’s sales. Last year, sales of production services in China accounted for about 19% of sales, and that number is expected to decline some in the coming years if the company’s pattern of capital investment is any indication. Over the past 8 years. The company’s base of manufacturing assets in China has declined by 61%, while its manufacturing assets in #Mexico have expanded by more than 81%.  Over that same period, Flex’s fixed assets in the US have risen by just less than 1%, expanding at about half the rate of inflation. These patterns are remarkably similar to what we saw with Jabil in part one, suggesting that the largest users of #EMS services are pulling back from China, but not necessarily in favor of US #manufacturing.  Supply Chain Resources Group, Inc.'s own customer data and revenue patterns suggest that the primary beneficiaries of production moves out of China have been #Vietnam, #Thailand, #Mexico and #India, with the latter really gaining market share just in the last few years. In part 3, we’ll look at what US import trends have to say about where the fastest growing technology manufacturing areas are and what that means for a China +1 strategy in this new era of #tariff uncertainty. #supplychain

Electronics contract manufacturing is a relatively capital-intensive business, requiring somewhere between $100K and $200K in fixed capital (property, plant and equipment) to produce $1M in annual revenue. Deploying that capital takes time, sometimes as much as two or more years if one is building new factory infrastructure. So, looking at where #CMs are deploying fixed capital today, is a pretty good indicator of where they think the demand for their services will be a year or two out. We recently took a look at the largest non-Asia based Electronics Manufacturing Services (#EMS) provider, Jabil, to see how their fixed capital deployment has changed over the past 20 or so years. The company does not break down all of their capex spend by country, grouping a lot of it into “other”, so we decided to focus on just their three largest bases of installed capital; the US, Mexico and China. The relative trends there are a bit telling supporting what our own Pete Mikhjian calls the ABC strategy – "Anywhere But China." China's share of deployed capital assets has dropped by more than 55% over the past 9 years, suggesting a massive shift in #manufacturing capacity. The data also supports the nearshoring movement, with fixed asset deployment in Mexico reaching its highest level in more than 20 years relative to China. What the data do not support is an onshoring or reshoring movement of any substance. Jabil’s share of fixed capital assets deployed in the US has dropped by almost 50% since 2013, suggesting that the manufacturing activity exiting China is finding a new home outside the US. Follow SCRG as we reveal a bit more about what data from various EMS providers suggests for the future of contract manufacturing outside of #China. #supplychain,

Come see our CRO, Pete Mikhjian, speaking on supply chain and how AI & technology are making impacts on global trade tomorrow at IPC APEX @ 11:30am PST - join us. https://lnkd.in/dtGC8cr6

ABC......"Anything But China" Tech Companies like Applied Materials, Lam Research, Intel, Infineon, and Micron Technologies are accelerating production shifts away from China. 🔹 Manufacturing is moving – Vietnam, India, and Mexico are attracting more production as companies diversify. 🔹 Supply chain resilience is key – Tariffs, regulations, and geopolitical risks are driving companies to rethink sourcing strategies. 🔹 New risks and costs emerge – Shifting production impacts logistics, labor availability, and quality control. 🔹 Opportunities for competitive advantage – Companies that adapt quickly can reduce risk and gain supply chain flexibility. The question isn’t if companies should diversify — it's how fast can they do it. https://lnkd.in/ek4zbdWZ

A couple of years ago we received a particularly memorable call. A frustrated VP of Ops at an #OEM was absolutely going off about how terrible his #EMS provider was. He said they were very cheap, but that their quality was bad, status reporting was horrible, key employee turnover was high, and that they were not proactive about anything. He wanted a to make a change and find a new EMS company to work with – “but they have to be cheaper, because I can’t switch suppliers unless they are cheaper.” We decided that we probably could not help this particular company solve this particular issue. There’s an old adage in outsourcing that goes something like this: “You can manage a good supplier to have a bad result, but you can’t manage a bad supplier to have a good result.”  And, as former SCRG exec Mark Medlen always put it, “in outsourced manufacturing you don’t get what you contract for, you get what you manage to.” Did this OEM have a truly bad supplier, or did they just not manage the supplier’s performance to meet the OEM’s needs? We’ll never know for sure. But choosing the right supplier, and managing them appropriately – and cost effectively – is often what separates fast growing, top performing OEMs from the rest of the pack. Whether you need help finding the right #suppliers, or cost effectively managing your current suppliers, SCRG can help. We help manage suppliers in #India, #China, #Vietnam, #Thailand, and half a dozen other countries for the world’s largest tech companies, and silicon valley’s most promising start-ups……..maybe we can help you too. #supplychain

Yes, SCRG is always on the lookout for strong talent in AP!

Selecting the right CM or EMS partner isn’t just about price—it’s about fit, execution, and long-term success. Here are some of the most common mistakes we see from OEMs: 🚨 Overvaluing the Quote – The lowest unit price on paper rarely reflects the true cost. Think about NRE's, scrap rates, delays, engineering changes, and supply chain risks. 🚨 Assuming a Tier 1 CM = Best Choice – Big names look impressive, but they often prioritize their largest customers. Are you important enough to them? 🚨 Ignoring Supplier Fit – A CM that builds for your competitor might actually be an advantage—they understand the tech, the processes, and the pitfalls. 🚨 Betting on "Partnership" Promises – A supplier saying they’ll "invest" in your business means nothing without a clear commitment in writing. Maybe they can cover some of the NRE's (conveyors, tooling, etc.)? 🚨 Underestimating Soft Costs – Think about travel, oversight, communication issues, and the agility of their response teams. Having someone on the ground in your corner gives you a true edge. Small inefficiencies compound over time. 🚨 Prioritizing Sales Over Operations – The best PowerPoint doesn’t equal the best factory. Visit the floor. Talk to the engineers. Review their past launches. 🚨 Thinking Bigger is Always Cheaper – Large EMS providers sometimes have higher overhead, longer lead times, and less flexibility for smaller orders. The truth? Your ideal CM isn’t the cheapest or the flashiest—it’s the one that aligns best with your needs. At SCRG, we’ve helped clients vet 9000+ suppliers & CMs across 25+ countries, ensuring fit, capability, and reliability. If you’re struggling to make the right decision, let’s talk. #supplychain #manufacturing #EMS #OEM #contractmanufacturing #Vietnam #India #Mexico #China

The US imported about $9.2B worth of cable and satelite set top boxes in 2023 from #Mexico. If the US makes good on its threat to impose 25% #tariffs on all imports from Mexico, will #manufacturing of these products move to a different geography? If so, where? Let us know what you think.

There is some interesting data that suggests that supply chain is becoming more of a focus for C-suite executives than in years pasts. In 2014, less than 45% of Fortune 500 companies had a C-level executive specifically for supply chain. Fast forward 10 years, and we find that 453 Fortune 500 companies, or 91%, have a Chief Supply Chain Officer. Another interesting statistic supporting the notion that supply chain management is becoming both more of a focus, and more of a concern for top corporate executives, can be found in the mandatory filings that publicly traded companies make with the Securities and Exchange Commission. The mandatory annual filing, known as the 10-K filing, is a great place to find out both what companies are excited about, and what they are worried about. All 10-K filings have a section on risk where companies must detail risks to their business and their financial performance. Other sections of the filing discuss new corporate developments, important initiatives, various financial metrics, and compliance with various federal laws. Some excellent research by our #supplychain research team reveals interesting insight into changes in the 10-K filings of Fortune 500 and Fortune 1000 companies over the past 10 years. Based on a sampling of hundreds of 10-K filings, our researchers show that in 2014, the average Fortune 500 10-K filing used the words “supply chain” 2.8 times.   By 2024, the average number of times supply chain was mentioned by those same companies in 10-K filings had increased nearly exponentially to 18.2 times (a sample shown below). Clearly #supplychainmanagement is getting a lot more mindshare amongst the leaders of America’s largest companies. We asked SCRG seed investor Michael E Marks of Celesta Capital what he thought was driving the increased focus on supply chain management in the C-Suite. As the former CEO of Tesla, the former CEO of Flex, a legendary silicon valley tech investor, and someone who taught supply chain management at Stanford University Graduate School of Business for more than a decade, Michael knows a bit about supply chain management. According to Michael, "The ever increasing speed of new technology developments has certainly played a role, as has the uncertain and somewhat unpredictable nature of trade protectionism. Plus, so many companies learned a hard lesson about how fragile their supply chains were after the Covid pandemic. Many companies are finally realizing just how critical supply chain is to their innovation plans and of course their top and bottom line growth."

New Tariffs Create Opportunities for Smarter Supply Chain Strategies The U.S. is introducing new tariffs that will reshape global trade dynamics: 🔹 25% additional tariff on imports from Canada and Mexico 🔹 10% additional tariff on imports from China 🔹 Energy imports from Canada will have a lower 10% tariff With Canada, China, and Mexico making up 41.7% of total U.S. imports, companies must rethink sourcing strategies to stay competitive. Crude oil will be particularly impacted—61% of U.S. imported oil comes from Canada. While rising costs create challenges, they also open the door for smarter supply chain solutions: ✔️ Diversifying suppliers to avoid tariff-heavy regions ✔️ Exploring nearshoring to lower risk and improve logistics ✔️ Optimizing workforce strategies to maintain efficiency and cost control Manufacturers and supply chain leaders that can find experienced talent faster to navigate these shifts will get ahead. Whether it’s supplier quality management, production support, or new product introduction, having the right people in place is key to adapting successfully. Are you reassessing your supply chain in light of these changes? #Manufacturing #SupplyChain #TradePolicy #Tariffs #Reshoring #SCRG