Challenges and solutions for OEMs

An Original Equipment Manufacturer (OEM) is a company or organisation that manufactures or sells non-marketed components to other companies. These companies then use these components to create their own marketed products. 

Over the last few years a number of industries have faced several challenges with supply chain and shortages, such as the global semiconductor shortage, and with the UK likely heading into a recession, there may be more turbulent times to come. In this blog we will discuss some of the challenges OEMs have faced, and explore some of the solutions for creating successful strategies to be one step ahead of the curve.

Recent industry changes

While a number of industries have faced several challenges in the last few years, the automotive industry has been one of the hardest hit. The global semiconductor shortage has, historically, suffered from several shortages, but none as severe as the recent shortage which began in March 2020, at the start of the pandemic..

As businesses were forced to close, and people were told to work from home, there was a huge influx in companies and individuals purchasing new tech equipment to help kit out their ‘WFH’ offices. Industries like the automotive industry suffered from a huge dip in demand from consumers, meaning production lines were paused, with companies such as Ford losing 20% of its production in Q1 of 2021. The on-going changes in the market lead to supply chain issues, which, accompanied with shortages, has resulted in a lot of fluctuation and uncertainty.

This isn’t, however, the only challenge the automotive industry has faced. The demand from consumers, particularly over the last ten years, has changed immensely alongside their expectations. New companies and manufacturers have entered the market, such as Tesla, alongside an increase in products and companies coming to the market for electric cars. These new, innovative products and companies have meant there has been a big shift in supply and demand across the industry, as the needs of consumers change. OEMs have had to move away from being product lead, or engineering lead businesses, to become more focussed around data, trends and what the consumer is looking for. This means they’re becoming more consumer centric, rather than product centric.

Data should be in the driving seat, in particular for the automotive industry, but also for all OEMs. They’re moving away from linear, product focussed strategies and instead moving autonomously with the consumer. Wherever you look, technology, data and digital is all around, and consumers expect real time updates and changes. Look at TV streaming; Netflix, Amazon Prime, Disney+. All these services are being updated constantly with new products. Similarly, smartphones are continuously updating and improving, often overnight when you’re asleep. OEMs and industries need to look at how they keep up with consumers’ fast-paced expectations and embrace the digital, data driven world we live in. 

But how can OEMs embrace these changes, become more consumer focussed and turn these challenges into lucrative opportunities?

IoT security

We’ve spoken about OEMs keeping up with consumers’ needs and expectations in a digitally and data driven world. But as OEMs grow and expand to become more data driven, so do their security risks. 70% of companies have been the victims of hacking through IoT devices, which can cost OEMs hundreds of thousands of pounds in revenue and damages. 

However, it’s not just about OEMs keeping up with consumers by expanding their data and digital services, they’re now required to meet minimum cyber security thresholds within the products they’re producing. Doing so requires an understanding of software, hardware, operating systems and security. All of this can be both timely and costly, so how can you manage this?

1. Ensure you’re clear from the conception stage what the security needs and requirements are for your product so you can plan appropriately. There are models and frameworks in place such as the PSA security goals that you can follow to help you do so.
2. Complete a threat and security model analysis in order to identify the threats to your device and the appropriate level of security needed and ensure you’re not over or under investing in your security.
3. Choose a chip based on the needs of your product and what level of security it needs. There are three different levels you can choose from depending on what you’re looking for.
4. Integrate your software platform with the chip’s Root of Trust (RoT). If you choose components that have a RoT, you know security has been built in and your device will be secure.
5. Certify your device or IoT product. By doing so you will be able to reuse the chip and software certifications.

The above steps will help you to navigate the complexity of securing your IoT products in a digitally driven market. 

High development costs

The fallout of the pandemic has had turbulent effects on the market and the economy. With the UK looking likely to be heading into a recession and the pound touching a record low against the dollar, what does this mean for OEMs and development costs?

Two industries in particular could be at risk from high development costs: automotive and construction. As the demand for electric vehicles increases, so is the cost of their development and supply chain. Electric car companies could be looking to make a loss due to the high development costs, according to a recent study, which could have an impact on OEMs in the automotive industry for years to come.

The construction equipment industry relies heavily on GDP growth, and subsequently has seen fluctuation, with sales dropping between 10% – 25% in markets across Europe in 2021. With 10 – 20 large OEMs within the industry, and economic uncertainty ahead, factored with a competitive landscape, the CE industry is likely to have significant change in coming years. Similar to the above, the CE industry is seeing an increased demand for a digital presence, meaning OEMs will need to adapt and digitalise their strategies moving forward. OEMs should ensure they’re following the necessary security measures outlined in this blog to keep their products and company safe.

As sales of large machinery may drop, and rental used instead, some companies may look to use old equipment to save on costs. OEMs should look to ensure they’re providing after care services, and including maintenance, repairs and parts for older machines to help consumers and expand their service offering.

Construction based OEMs should also ensure they’re considering and planning their ESG and sustainability strategies as more consumers have targets in place. OEMs should invest R&D and pilots to define their alternate fuel strategy. They should take note of emerging business models that incorporate new technologies, such as site-charging infrastructure, battery swapping, and battery-as-a-service.

All OEMs should be working on using forecasting tools as a priority. Utilising data-driven, analytical models that allow them to make rapid adjustments to production and supply chains will help to control costs and implement a strategy for consistent revenue.  

Expectation setting

Consumer expectations are ever changing, as industries and markets battle to keep up with a digital first generation. What works now, or worked five years ago, may not work in a year or even a few months. OEMs must be constantly watching market trends and looking for new ways to improve their products and bring them to market.

Consumers are no longer just concerned with the experience they have with a product, but the brand too, be it on social media, in-person or via the website, so it’s important that OEMs are prioritising their customer experience. 

Focussing on your customer end-to-end experience and retention is key, keeping communication at the front of mind, be this through social media or email marketing. But before ensuring that end-to-end experience is in place, it’s important to get the first step right: managing expectations.

With consumers’ needs frequently changing and expectations higher than ever, it’s vital to ensure you’re clear on your clients’ needs before moving any further. Nothing impacts client retention more than over selling and under delivering, or misunderstanding a brief.

In order to ensure your expectations and your clients are aligning, here are a few simple steps you can follow:

1. Ensure you have a simple, but informative form in place on your site that looks at a few key things:
   1. What they’re looking for.
   2. When they’re looking for it – is their deadline realistic with your production time?
   3. What budget do they have in mind – is this realistic with the high development costs affecting the industry?
2. When the form has been analysed by a member of your staff, set up an initial briefing call where you can understand and establish a few more things, really getting under the skin of what your client is looking for, but also getting to know them and their business a little better.
3. Organise a final briefing call that includes specialists, such as designers or engineers, who can ask any specific questions to ensure everyone is on the same page.

Keeping up with new technology

Needless to say, consumer expectations are changing and increasing in a direct correlation to new technology consistently being developed. Keeping up with the latest technology and trends is paramount to ensure you’re still offering the best service and products against your competitors.

OEMs should be keeping a close eye on technology megatrends in the industry. For example, autonomous driving and connectivity in the automotive industry is a huge driving force, with 64% of consumers stating they would switch OEMs for better autonomous driving capabilities. This means, automotive OEMs need to ensure they’re utilising their software and strategies towards new technology to allow for these enhancements in their products.

In order to ensure you’re keeping up with the latest technology and trends in your industry there are a few simple steps you can follow:

1. Sign up to industry newsletters
2. Attend conferences and industry events
3. Follow relevant social media channels within your industry for the latest breaking news
4. Identify some keywords from your industry and track them to see what questions are being asked and what people are searching for to ensure you’re ahead of consumer intent

What’s the relationship between OEMs and ABL Circuits?

ABL Circuits works with OEMs to help source vital components needed for PCBs from various industries in order to create your desired end product. There are a number of reasons OEMs work with us as their PCB assembly contractor, and why some companies need to outsource PCB assembly. Some may be time poor or lack the resources and latest innovative technology to create the high quality needed for their products.

As well as saving time and producing higher quality products, some OEMs work with PCB suppliers like ourselves for support and advice. For some in-house companies and organisations that rely on a small number of PCB designers or specialists, the necessary support structure is not always there to lean on. Some may also not have the depth of experience and knowledge that our specialists, some with nearly 40 years of experience, have under their belts.

ABL Circuits offers a one stop shop for all your PCB needs. We don’t just specialise in one area, but have experts at hand to guide you through every part of the process from design, all the way through to your finished product. 

If you’d like to find out more about how we work and how we can help you, get in touch for a free quote.