Circuits Assembly - December 2008 - (Page 21) Cover Story nurturing the accounts, while market sector VPs (MSVPs) are the “hunters,” working closely with customer managers to refine service and support needs and define market opportunities. Those hunters have been working overtime. For its fiscal year ended Sept. 27, Plexus’ revenue jumped 19% to $1.84 billion, bringing its five-year organic revenue CAGR to 18%. The return on invested capital was 20.1%. Yet for a company whose revenue has grown $600 million over the past three years, the customer base is practically going the opposite direction. The big switch came in 2003, after Plexus recorded a net loss of $68 million. The number of customers dropped from 238 in fiscal 2002 to 107 in fiscal 2006, when it recorded sales of $884 million. The sales per customer, however, jumped almost fourfold to $13.3 million during that time. Today, Plexus is on track to generate an average $14.1 million per customer, based on about 131 accounts, primarily in the networking, wireless infrastructure, defense and security, aerospace, and of course, medical sectors. Growth has traditionally been organic, not via acquisition. Stanford professor and business author Jim Collins, who teaches focus and execution are keys to long-term success, is a strong influence, company executives say. Like Jabil and Benchmark, and unlike most other large Tier EMS players, the majority of Plexus’ manufacturing space remains in North America, where it hosts seven of its 13 sites (not including the just-shuttered plant in Ayer, MA). About 56% of the company’s 2.1 million sq. ft. of plant space is in the US and another 5% in Mexico, versus 35% in Asia and 4% in Europe. And most of the Asia capacity is not in China but in Malaysia, where the firm has 696,087 sq. ft. across three sites. Plexus signed a lease in September to bring a plant online in Hangzhou, its second in China; the additional 106,000 sq. ft. will bring its Asian footprint to 948,000 sq. ft. Production is expected to begin late in January 2009. Relative to other top-tier EMS companies, Plexus’ disinterest in China is noteworthy. Why hasn’t Plexus followed the herd East? Ultimately, the mix didn’t match the locale. While every Top Tier EMS firm was under pressure from customers and Wall Street to offer a China "solution," for a low-volume, high-mix company like Plexus the math doesn't always work. Several competitors suffered deeply trying to establish local supply chains in Southeast Asia. Plexus navigated those obstacles with the skill of a brain surgeon, focusing on more established, lower risk areas like Malaysia. As logistics and other costs rose, the EMS firm looks more and more prescient. Over time the trend for products where IP protections are paramount or end-product weight is a factor – in short, Plexus’ main markets – has become to build product close to where it will be consumed, putting Plexus in a great competitive position. “We really need to think about the customer,” adds Kirk Van Dreel, global process owner, PCBA. “You can sacrifice customer service [when you move programs around] if not managed and executed effectively. We utilize a dedicated transition team and process to ensure we maintain customer service levels during these types of transitions.” Expansion is inevitable, although the locations being considered aren’t so easily predictable. Besides the new factory in Hangzhou, Plexus is considering various sites in Eastern Europe circuitsassembly.com and perhaps additional capacity in Mexico. Romania, Poland and Slovakia are current contenders, while the Czech Republic has been ruled out as “overbuilt.” Says di Loreto, “We’re walking the balance between where labor is low cost – but not the lowest – but focused on customer service.” The company estimates a worldwide footprint of 2.6 million sq. ft. by 2012, up about 44% over 2007. Embedded in that estimate are 250,000 sq. ft. in Eastern Europe and 1.4 million sq. ft. in Asia-Pacific. South of the border, some longtime employment struggles have been worked out. Turnover has dropped from 10% per month to 1%. A decision will be made in the next six to 12 months whether to add capacity in Mexico, di Loreto says. It very well may be that placed programs tend to stay in one spot. But at Plexus, designs fly around the globe. Over the course of a day, the company has in-process coverage for about 20 hours, six to seven days a week. ASIC designs have given way to FPGA, primarily Xtera and Xilinx. Libraries are designed to retain customer “building blocks” to encourage design reuse. The smallest piece would be component footprints and geometries. On top of that would be process and DfM guidelines. The next level of reuse is more of a fine line. “We looked at it from a technical and legal standpoint to be able to reuse these [process technology] building blocks without getting into confidentiality problems. We don’t cross-pollinate engineers,” says Van Dreel. Design teams are kept Circuits Assembly DECEMBER 2008 21 http://www.circuitsassembly.com
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