SMTA International Conference Proceedings


Authors: Keith Garrison and Sal Bora
Company: Suntron Corporation
Date Published: 9/25/2005   Conference: SMTA International

Abstract: A tiny "flip" phone with a color display - all for $29. A quick trip to the mall and I was quite pleased with the deal. Let’s all hear it for free market American capitalism. The purchase was not without thought though. The phone is from a foreign manufacturer and this South Korean company was formed from the assets of the former Zeneth Electronics. Zeneth resisted the push to utilize offshore manufacturing and subsequently filed for bankruptcy in 1999. Play or pay. Perhaps if protectionism ruled and heavily regulated American companies utilizing community labor drove the market-selling price I would have paid $500 for a cell phone of lesser technology.

I believe I was having a proverbial Goldratt moment (ref. the book "The Goal"), except instead of sitting on the hill overlooking the factory I was sitting at Starbucks staring at this phone. The differentiator in selecting the phone was price. It’s always about price. Technology driven OEMs are racing to reach the market with their next generation product, with the goal being to outperform current product offerings at a lower price. Shedding the burden of capital investment with survival strategies to find the greatest value for the dollar are reaching further into manufacturing sectors once thought not susceptible to offshore outsourcing. Commodity products produced in volume (such as the cell phone) are easily outsourced.

In the face of increasing price pressure created by Low Cost Regions (LCR) such as Asia, the Electronic Manufacturing Services (EMS) industry continues to be squeezed by their customers to reduce costs resulting in eroding margins and forces them to become more efficient manufacturers. Add to that an increasing complex supply chain with outsourcing from offshore resources and it creates a scenario that has many CEO’s of the EMS industry looking for processes and tools that will continue to satisfy their customer’s price reductions as they continue trying to maintain their margins and business.

Every manufacturer is under pressure to reduce lead times, and reduce costs; and that problem isn’t necessarily unique to the EMS industry. The "cost" pressures are felt throughout the supply chain and are pushed down the chain to the suppliers of the EMS industry. Vendors and parts suppliers are constantly under pressure to reduce their costs to their customers as well as assist their customers in the reduction of lead times for the parts that they supply.

As product technology develops, the EMS manufacturing sector must adopt change at an exponential rate in order to maintain or capture additional market share. How do we avoid contentment with current processes and silently adopting a ‘status quo’ mentality?

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