Circuits Assembly - March 2008 - (Page 58)

Offshore Expansion Figure 2. A PTH line in Kimball’s Laem Chabang, Thailand, facility. Figure 3. Operators perform electrical test at Kimball’s Laem Chabang plant. a markup in pricing. There are oversight costs for EMS provider audit teams, and typically the EMS firm carries the bulk of the program management responsibility. Systems incompatibility can impede documentation transfer, and time zone and language differences can impair communication. Real or perceived issues with supply chain integrity also can occur, as purchasing activities are no longer the sole responsibility of the EMS provider. Reduced visibility of inventory levels at the offshore partner or in transit is a consequence of this type of arrangement. Another potential disadvantage is the alliance partner’s motivation to modify core business models to accommodate high-mix/low-volume production. Strategic alliance partners in low-cost regions often have business models that favor high-volume production and minimal schedule flexibility. Domestic EMS providers tout schedule flexibility as a key advantage over low-cost regions. They may be reluctant to drive changes in the offshore model, as this increase in schedule flexibility could result in moving more business to the alliance partner and squeezing profit margins for the domestic firm. These internal business model conflicts can turn a strategic alliance into a reluctant arranged marriage where both partners acknowledge the relationship but prefer to focus on other interests. While some customers may embrace the model, others may have concerns about supply chain integrity, schedule flexibility, quality or total cost. Maintaining intellectual property integrity also becomes a bigger challenge in an alliance relationship, as the domestic EMS provider has less control of the entire process. RMS considered these issues carefully in selecting a strategic partner. A project team composed of representatives from supply chain management, manufacturing operations and quality drove the selection process. During a two-year period, the team made six trips to China for potential partner site audits. They found different strengths and weaknesses at different companies within China. In some cases, potential prospects lacked good financials (or at least verifiable finan- cials), and in other cases, key quality certifications were not in place. The team narrowed the options to a group of three potential alliance partners. The chosen partner had board-level, mechanical assembly and total box-build capabilities. Another advantage was its U.S. headquarters was in Chicago, which facilitated communication during U.S. business hours. The selected partner was smaller than RMS, was certified to ISO 9001:2000 and used industry-recognized workmanship standards. A good working relationship was established with the company owner. The strategic partner actually installed a board-level assembly process that mirrored the processes found in RMS facilities so seamless transitions were possible. Non-compete agreements were established to protect each company’s respective customer base. While the relationship achieved its primary purpose of providing an option for RMS customers needing to migrate some production to China, it did not represent a good longterm globalization strategy. RMS had a primary goal of growing its domestic sites, which reduced focus on the strategic alliance. The resulting lack of consistent projects for the alliance partner and overall profitability constraints associated with these projects hampered the alliance’s success. The Case for Greenfield KEG followed a different model in expanding global reach. Unlike RMS, KEG had the customer demand and financial resources needed to successfully expand globally. As part of a large multinational company, it also had established experience in expanding to new regions. When the company added a greenfield facility in Nanjing, it was faced with the challenge of filling capacity in a new location. However, it also had the advantages of a robust methodology used to facilitate rapid transfer of standardized processes, standardized equipment and a common IT platform. This helped support personnel training activities and quality certification processes. The result: a facility completely aligned with the overall company business model and circuitsassembly.com 58 Circuits Assembly MARCH 2008 http://circuitsassembly.com

Table of Contents Feed for the Digital Edition of Circuits Assembly - March 2008

Circuits Assembly - March 2008 Caveat Lector Letters Industry News Market Watch Talking Heads Focus on Business On the Forefront Screen Printing What Drives the Crowd? Mastering ESD Control in Automated Handling Systems Beating the RoHS Heat Trade Secrets True to Its Roots The Road Abroad - Strategic Alliance or Greenfield Facility? Tech Tips Wave Soldering Test and Inspection Process Doctor Pb-Free Lessons Learned Getting Lean Materials World Equipment Advances Apex Product Preview Ad Index Assembly Insider Technical Abstracts

Circuits Assembly - March 2008

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