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Global Company, Local Advantage
February 20, 2013 |Estimated reading time: 5 minutes
Editor's Note: This article originally appeared in the January 2013 issue of SMT Magazine.
Presenting a friendly, local face helps to ensure a close, successful, and long-term relationship with customers. Problems can be addressed quickly, before they become serious, which leads to the development of trust between the customer and the supplier. However, in the real world, you are unlikely to have a factory next door to your customers--especially if they are in a high-operating-cost country.
The solution is to balance the location of different resources within an EMS operation so that they are easily accessible to the customer, if needed, with the rest located in a low-operational-cost area. ESCATEC has one end of its business located in Switzerland, giving a central European location to service customers, while the other is located in Malaysia for high-volume, lost-cost manufacturing. Figure 1: Malaysia is a site for high-volume, low-cost manufacturing.
So how do you balance the geographic locations of various team members for optimal customer support, performance, and cost efficiency? Key jobs can be assigned to a graph with the following three dimensions:
- The Y axis shows the increasing level of customer interaction: How important and how intensive is the involvement of the customer?
- The X axis shows the distance to customer in km and also shows the level of manpower needed to realize the project.
The result is three distinct groups split by level of customer interaction and distance to customer. Unit I has the most direct customer interaction, i.e., the sales engineer who finds the projects and then maintains the customer relationship to ensure it is running smoothly in conjunction with the project manager and systems engineer. Ideally, there should be a Unit I group in every country where the company is doing business to provide local support in the local language. Good locations are near customers’ R&D headquarters and near airports with international locations. Figure 2: This graph can help balance geographic locations of various team members for optimal customer support, performance, and cost efficiency.
These satellites feed into Unit II, which includes the design engineers who work on the actual project. This unit will need to be close to Unit I and staffed by highly-experienced engineers. It may be expensive to locate Unit II in central Europe, but it can also be cost-effective, as Unit II’s expertise means that designs accurately meet customer requirements and can be performed much faster due to a short feedback loop. A central location in the heart of Europe means that journeys to customers only take a few hours and are in the same time zone. Unit II should also be located near a university to provide access to cutting-edge technologies and young talent.
Unit II focuses on three areas. First is the technical support for the Unit I team on various projects. The second is design services--an increasingly important service to customers. As a contract R&D operation, it provides the first stage in a complete “soup-to-nuts” service where the company is responsible for all stages, from initial product design through prototyping to volume production. This avoids problems caused by the typical business model with various stages being performed by different companies with handovers that can create problems such as the need for redesigns, delays, and additional risk. A vertically-integrated approach of providing complete service from concept to manufacture ensures that products are designed for manufacturability from the beginning and cover all aspects from mould design through to ensuring that components are not likely to go end-of-life in the near future. Third, Unit II has prototyping and low-volume lines that serve several purposes. Prototypes can be viewed quickly by the customer so that feedback can be implemented to shorten the design cycle. This can then move into the initial, low-volume production using the same production lines and programs that ensure trouble-free ramp up. For some products, the low-volume capacity may be sufficient especially if they are high-value items for use in medical or military equipment.
Figure 3: The Twinstream™ Ventilator designed and manufactured for Carl Reiner GmbH. (Photo courtesy Carl Reiner GmbH) If high-volume production is required, Unit III can be located anywhere with low-cost labor, such as Asia. The country features a mix of labor from low-cost production line workers up to the higher-cost engineers who perform process, test, quality control, etc. Some of the workforce, such as procurement staff, supports not only Unit III, but also Unit II to give the benefits of centralization.
Having a high-volume manufacturing Unit III in Asia also means that the unit is located close to components suppliers, toolmakers, plastics, etc., to ensure rapid response times and a high level of supplier support.
Figure 4: ESCATEC’s high-volume manufacturing facility in Penang, Malaysia.
To enable production to be easily moved from Unit II to high volume in Unit III, the same production equipment is used in both facilities. Software programs perfected in Unit II for manufacturing machines can be run on the exact same machines in Unit III so that production can be rapidly transferred.
The assigned project manager in Unit I oversees not only Unit II design and low-volume production, but also high-volume production, if moved to Unit III, to ensure seamless continuity for product production at all stages. This builds a close relationship with the customer as they have the same, single point of contact for every stage, from concept to industrialization, to ensure that the requirements of quality, functionality, time-to-market, unit price, and development costs are consistently met.
In summary, pure EMS companies need to expand their offerings to become more competitive and offer customers a complete, one-stop service especially now that a market opportunity to pull back business lost to China exists. This window comes from the realization that using manufacturing facilities in China can be fraught with problems that are not initially apparent, such as consistent quality control, IP leakage, language misunderstandings, unauthorised component swaps, etc. Large multinationals solve most of these problems by having their own teams in China to supervise every stage, but this might not feasible for smaller companies. By expanding operations from just manufacturing to a complete service that removes coordination headaches and risks by taking responsibility for all stages, EMS companies have the opportunity to differentiate themselves and grow by providing a real value add--not by endlessly trying to shave prices on a race to the bottom that no one really wins.
Daniel Pfeifer is global R&D manager for ESCATEC. He joined ESCATEC Switzerland as an R&D engineer from Munich University where he obtained a Dipl.-Ing., Electrical Engineering and Information Technology in 2003. Over the past 10 years he has worked in various positions within the R&D division and, in 2011, was appointed global R&D manager.