UNDERSTANDING DIFFERENCES BETWEEN DEFENSE OEM/CEM AND TRADITIONAL CEM BUSINESS MODELS
Author: Allan B. Day Company: TEAM Technologies, Inc. Date Published: 10/24/2010
Abstract: This paper examines the lessons learned and business model implications from the experience of moving a contract electronics manufacturing (CEM) subsidiary of an Aerospace/Defense OEM to a pure-play high reliability EMS company. OEM company business models typically focus on product innovation and intellectual property. This is fundamentally different from a CEM not just due to the different priorities but also because of the scale and timing of the investments necessary to be viable. The length of time needed for an A&D OEM to recoup these investments is usually much longer as well. These factors drive decision-making processes, resource allocation, staffing, and company cultures that sometimes conflict with the qualities necessary for success in the high-reliability EMS marketplace. On the other hand, there are tools and process skills emphasized in an OEM that if properly adapted, can increase the value of the service offered by a CEM.