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With a level playing field in terms of access to talent, technology, knowhow, infrastructure, and financial resources, how can an EMS company build a successful business year after year, decade after decade? There may not be a magic formula that works for everybody in this fiercely competitive business. As a matter of fact, having a differentiated strategy relative to the competitors is one opportunity for success.
With the ever-growing pricing pressure is there any alternative to penny pinching? In my opinion, not only do successful alternatives to penny pinching exist, but they are necessary for long-term success. The teachings of a competitive strategy led by Michael Porter states that in a commodity market there is only one long-term winner, which is the lowest cost leader because he can lower the price until everybody else leaves the business. So unless you are the Walmart or Amazon of the EMS business, you may want to consider a differentiation strategy.
One EMS company in the St. Louis area has used a number of successful strategies, some of which are counterintuitive, that have led to a successful business since 1963. There may be lessons to learn when dissecting Siemens Manufacturing Co. Inc.'s strategies. (No relation to Siemens AG, the multinational conglomerate.)
The first striking revelation about this manufacturer is that it does not specialize in any specific industry segments or applications. According to Mike Siemens, director of business development, a diverse spectrum of clients provides less volatility in demand since various industry’s segments tend to be countercyclical to others. A growth in some industry sectors often compensates for downturn in other segments.
There is always a risk of being everything to everybody, which usually leads to being nothing to anybody. There is also a concern that by gearing up the factory to satisfy the most demanding customers, such as the automotive sector, expensive solutions go unappreciated by the less demanding clients. But what if we could look at this strategy in a different light? Are there best manufacturing practices valued by a wide variety of industry segments that also reduce production costs?
Before the 2008 industry downturn, the company implemented a Lean manufacturing practice to run its operation more efficiently at a lower cost. This was a company-wide initiative that proved hugely beneficial over time. Let’s drill down to a specific process and analyze how the company operates.
President John Siemens III states that because the pick-and-place machines do a great job, the company focuses more on the reflow and screen printing processes where there is room for improvement. Kelli Lubenkov, operational excellence manager at the company, believes that the RoHS thermal process is critical due to the narrow process window brought on by the heat tolerances of some of the components. The company has established the practice of profiling every new, unique PCB assembly before starting production. Additionally, previously run PCB assemblies are profiled after production line changeover to verify that the oven is ready to process the assembly in spec. This is an expensive practice because it leads to additional production downtime as well as an extra labor cost associated with technicians performing such a time-consuming manual task numerous times daily.
Editor's Note: This article originally appeared in the April 2016 issue of SMT Magazine.