My wife Pam and I had dinner at our favorite place last night (Maurizio’s – Encinitas, CA).   We were there last on Christmas Eve where after our dinner, one of the bus boys sat with us and needed help with a big problem.  Like many of us, he had procrastinated in buying his most important  Christmas gift.   His angst at selecting the perfect gift for his hard-to-buy-for mother combined with working so many shifts over the holidays had left him in a bind. What he had thought was his last chance had closed on him when the store next door wasn’t open prior to shift.

My dear wife mentioned how much Mothers love to be pampered that a spa package might be the best thing.  Mothers spend so much time caring for and worrying about others, a pampering gift couldn’t be more appropriate.  I chimed in with “Hotels are always open, you could probably buy her something on the way home”, not even thinking that you could probably get something like that done on a smartphone.

We saw him last night and asked him how it went.  The smile on his face said it all.  It was a home run.  It felt good to help him.

I share this story in the hope its useful to remind someone else who find themselves in a similar jam. I wish you all the warmest of holidays hopefully sharing some of it with those closest to you and a wonderful start to the new year.

 

Yesterday I spoke at the Del Mar Electronics show thread about reshoring, regionalization and the opportunities for local manufacturers.   I chose not to specifically speak about ‘challenges’ and instead kept the focus on ‘opportunities’ because that’s what they really are, right?   The issue boils down to comparing the differences in landed cost using different sourcing or manufacturing strategies to the differences in the indirect costs that will be incurred as a result of a strategy change.   There are a variety of different risk factors which stand apart from the variable landed cost: Obsolesence, Quality, Intellectual Property, Service Level Inventory.  The Reshoring Initiative’s Total Cost of Ownership model is a good tool for factoring these into your decision.

Obsolesence & Service Level Inventory – If the product has a very short life-cycle, there should be plenty of  history of how much product has been scrapped in the past or sold at a discount.   It’s up to you to decide how the cost savings compares to the average or worst case examples in the scenario factoring in differences in the length of the supply chain, if any.   Alternatively, what could you save if you didn’t have to commit raw material into the production process any further out that say a couple of weeks, not two, three or four months or more?

Quality – This is a tough one, but it is also the one I have the most examples on.    One of the first customer prospects I visited as a ‘pure’ salesperson (we’re all salespeople really.  ‘Pure’ means I carried the title as well) was an interesting case.  An engineer who had dealt with us previously was trying to help us replace a supplier that he felt was causing problems so he was looking for a new source for high mix, low volume cable assembly.  He showed me piles of defective product that they couldn’t return.   We quoted a couple of parts and because the current supplier was in Mexico and we where using US labor costs, I couldn’t get closer than a few percent.  On one high labor part we were 15% off.   I could guarantee 100% on-time delivery and assembly quality.  The difference in price was a fraction of what they were incurring in defects.  The buyer said “Why would I pay you more than my current source”?   If these were engineering issues, they wouldn’t be looking for another source, they would be interviewing Engineers.  The buyer flat out didn’t care about anything else than not looking soft by sourcing at a higher price even though it would likely save the company money over the long haul.

I always thought that bigger companies had the hardest time sourcing to total cost, but this situation jolted me out of that notion.   It made me recall a project earlier in my career.  I was responsible for a large printed circuit buy for a large automotive electronics company.  Reverse Auctions were all the rage for quick hit cost reductions and my group had been selected to get ‘help’ from a large consulting firm on such a project.  The firm wanted to perform an unqualified auction.  Sign potential suppliers up.  Give them instructions via conference call.  Send out the package and see what fell out of the tree when shaken.   I strongly and successfully resisted the ‘unqualified’ strategy at risk of limiting my career.  The project was an outstanding success, not just in what it earned us, but from what I was told happened with the same process ran by one of our competitors who had chosen the  ‘unqualified’  option.  Once the bidding was complete, they had to work their way well down the list to find someone who actually produced the product and was not a middleman/broker and further still to find a company who could actually do the work at the quality levels they needed.

You send a strong message with first impressions.  If you ask for cost or price before you even think about quality, you are sending a message on what is important.  If price is first, then you will move quickly when someone gives you a better one.  I often hear the excuse that ‘we’re in such a competitive business….’    I can’t think of many businesses that are not in a very competitive market.  No businesses are easy these days.   You can get any price you want, but what you get may not be what you need.  I want to suggest a different way.  Look at the ‘wastes’ in how you are doing business today and look for partners that can reduces those wastes and find the right price that makes everyone successful.

 

 

 

 

 

 

 

The release of the “Made In America, Again” and “Manufacturing Nears the Tipping Point” studies by the Boston Consulting group has given a lot of ammunition to those who have a stake in products ‘Made In USA’.   I am very happy to see the tables tipping a little bit more in our direction.   The electronic industry job boards are bursting with new postings and the economy seems to be helping.

The exodus of electronics manufacturing accelerated dramatically in 2000. It was a perfect storm of very high demand from Windows XP and the entire electronics industry from top to bottom was searching for capacity.  China entered the WCT and filled the vacuum.   Industry executives right and left were grabbing quick cost reductions by sending business offshore, mainly to China.   Cheaper labor was only one component of the cost reduction.  Cheaper alternative components combined with inequalities in regional cost structures made up the rest.

The large companies started the exodus and it appears the same thing is happening on the way back. GE, Apple and Google have all made announcements within the last year or so of new programs that will be built here in the US.   A recent survey by IPC last year concluded that new programs will represent most of the increase.  It’s not so much products coming back to shore, but as cost differences level out, more companies are going to follow strategies of designing and producing products where they are used.

One cloud on the horizon is the structural cost differences between the US and major trading partners in Europe and those in Asia.    I need to read the BCG studies again after looking at this because I’m having a hard time reconciling the two.   I am not seeing that kind of cost difference in quotes.  It depends on the cost model you are using and the truth probably lies somewhere in between.

I was with a medium sized EMS company that was extremely successful in growing at the same time the electronics industry was making a fast exit to Asia.  We did it by getting smaller before we grew and improving the business.  We drove lean through every nook and cranny.  We focused on the right customers.  Ones who valued short low-inventory/high response supply chains.   By delivering what we promised the customers rewarded us for it.   It’s a formula that will still work today.   The only question is will it lead to outstanding success or is it necessary simply to survive.

 

 

I read Alan Uke’s book “Buying America Back” and I think it’s absolutely brilliant!   It’s well written and lays out what I believe to be the most logical way to provide consumers with the information we should have (and I know that I would use ) to guide us to buy American products and failing that, at least buy products from companies that trade more fairly with us.  I would pay a few percent more to make a difference and I think many other people would too.

The Cool label would give us the content percentage by country along with the trade ratio for that country.  A high percentage means that most of the money we send to that country comes back our way.    If we all changed how we spent $1/day, by his math, we’d create 1 million jobs in the US.    Even if I paid 10% more, even 20% more, I’d consider it money well spent and would be returned in kind by those eventually brought back into the workforce.

I don’t think this has been given enough press.  I personally sent an email to 60 minutes – no I haven’t heard back yet.

 

The cost of doing business in China is going up and transportation costs continue to rise.  I wrote a article on Nearshoring that appeared in Circuits Assembly that talks about the various factors involved in deciding where to go when choosing an outsourcing partner.    I believe that Mexico will capture many programs that would have gone to Asia.   There will still be plenty of opportunities in the US for lean and competitive companies in the higher mix and higher complexity segments.

 

 

My first video interview last February at IPC APEX at the San Diego Convention Center.  I’m amazed at how well my state of abject terror was less than evident in this piece.  Kelly was great doing his best to keep me at ease although he didn’t ask the questions I expected him to ask.   My lesson to others.  Stay on your toes and be ready to answer whatever comes at you!

 

 

 

Starting and managing outsourcing partners is a complex and difficult process that is often misunderstood and neglected with disastrous results for all.  Success is laid in the foundation beginning of the project as much as in the middle and beyond.  Taking the lowest bid without a full understanding of all the risks is the surest path to career dead end and no good for anyone.   Build a good team with a good leader.  Empower them to define and lead the program and give them the right amount of support along the way.

Building the foundation of a successful partnership starts with a good understanding of what you are doing, why you are doing it and the risks you can expect along the way.  Carving out an existing operation or sourcing to increase capacity are vastly different than sourcing a new product for a startup company with no hard assets.  Companies in the latter situation need to get outside help without question.  Companies that are outsourcing part of an operation or certain product lines have an understanding of the undertaking.  The challenge is finding those people, bringing them together and motivating them to make someone else successful doing what they (and their friends in the company) are doing today.   Not a task for the feint of heart.

If I had to pick one task or decision as the most critical determinant of success of the project it would be selection of the project leader.   Don’t make the mistake of assigning the one person who understands the product and process more than anyone else at the expense of all other skill dimensions.  It’s also more than just assigning it to a VP.  The right amount of technical knowledge is dependent on who you put around them on the team.  In outsourcing an existing operation, the project  leader needs to have strong interpersonal skills to manage the strong emotions surrounding the project.

Once the team is formed the next critical phase is defining the requirements and writing a preliminary statement of work.  The more detail here the better.  Anything important left unclear or unsaid will surely result in misunderstanding and sow the seeds of discontent.   As with anything involved here, don’t be an intellectual martyr.  Admit you aren’t sure and get second or third parties to challenge your idea of complete.  Meet with suppliers as part of the preliminary RFP/RFQ process to insure they have a solid understanding of what you are looking for.  Their questions will improve your documents.  Lead them to restate their understanding of your needs in their terms.  If they can’t do it well, they don’t.

Remember that the salesperson always wants your business.    Salespeople get paid to bring home business from new clients.  The best and smartest companies screen their prospects and will avoid considering projects that don’t fit their strengths.  Is your business really attractive to the prospect?  How do they measure their business and their customers?  Are you in a ‘focus segment’?    A question I love to ask is “Who are your top customers and if you win my business will I make that club and why?”   The answer to this question and the following discussion is very important to understanding your prospects for managing the relationship and the risks associated with it.  If you make it into the top customer club, you should get the regular attention of top management.  If you get the regular attention of top management, that usually means you get the ‘A team’ on your project – or at least B team players they project to develop quickly into A team players which can be even better because sometimes the A team is spread too thin.

Selecting an outsourcing partner has often been paralleled to a marriage.   I don’t know the statistics but even the worst Hollywood or Wall Street divorce can be cheaper than an outsourcing disengagement.  Just as the start and middle phase of the program must be clearly understood, so should the end.  Who owns what?  What are the ‘bridge’ responsibilities?  The more detail here the better because once disengagement is public all the other motivations go out the window and it all boils down to what is clearly on paper.

 

I landed my second official (getting paid for it) consulting job in July and I’m finding it really isn’t a bad way to go.  Strategic or process consulting is fun because you get to solve big problems without the burden of day to day responsibilities.   My career focus has been manufacturing operations and supply chain.  Depending on the industry, it can be hectic on a good day.  Being able to get into the guts of the business without having to deal with the daily operational issue, unhappy customer or problem supplier is a nice change.

The bad thing that I always heard about consulting is that you are always selling yourself between jobs.  And how is that different from the real world?    Selling yourself is a fact of life these days.  No matter if you are currently employed or in-transition, you have to constantly be on the lookout to protect your turf or find a new range.  From CEO to entry level, there’s someone out there that would love to eat your lunch.

The most important thing for any employee to do, contract or not, is to demonstrate value add over time.  The more the value added over the shorter the amount of time the better.  A happy customer can turn into a full time employer and at worst help sell your next opportunity.  In the current economic and employment climate, more and more senior roles are temporary by nature if not by circumstance.   You have to sell your way in, but you also have to sell once you get in.

Once your inside you need to get to scoping out the real depth and breadth of the problem you are about to solve.     That’s going to require you to get behind the scenes and find out what is really going on.  The best way to do that is meet with the people directly involved or affected by the process you are working on.   The most important thing to get across is that you are here to help and you need their help to understand how you can do that.

Don’t expect to get the real answer on the first try.  You may hit the jackpot early, but until people trust you, it isn’t likely.   If you do well on your first couple of meetings, word will get around that you’re “OK” and people will open up to you.  It’s very important to read people and change your approach as you go.  If people are answering you with small word count sentences, keep it soft and easy and retreat for a deeper follow up on the next try.   If the flood gates open, don’t change the subject!

One of the natural circumstances of being a consultant is that you are a permanent outsider.  Most people do not welcome change in the first place so when it comes from an outsider, resistance finds friends very quickly.   You have to get used to the fact that the best you can do is make a strong case and hope common business sense takes over and people pick up on it.   Having the right executive champion can be the difference between success or failure.  They should help coach you when things get rough, but try to keep their help behind the scenes or whatever trust you’ve built will quickly vanish.

Be careful how you introduce and carry yourself.  People are much more likely to chip in and get behind you if they trust you are here to make them all look better and it’s not about you.  In this way good leadership strategies make the same sense for the consultant as they do for line management.  There is no ‘I’ in team, etc.  When you are asked to make observations and recommendations about the current state of a process or operation take care at how you present things.  Keep it impersonal and objective.   Soften every criticism with a positive point.  Choose your words very carefully.  Point out better ways to do things instead of finding fault with how a particular function or person does it today.

 

 

 

A day doesn’t go by when I don’t get an email, see a pop up ad, group discussion thread or even a blog post that is pushing some software system or another that implies it will save the day in terms of transforming a supply chain.   Information management and timely communication are both foundation pillars for managing the flow and production of materials.  The faster demand signals can be sent back upstream, the sooner they can be reacted to.   Material expediting becomes so much easier if material status is available on a real-time basis.  A lot of phone calls and emails can be saved.   A few thoughts for those contemplating supplementing their current supply chain/operations management systems.

Do I need to mention that your “A” players need to lead this from the pre-selection phase through installation and post mortem?   The “A Team”  must delegate or offload enough work to others in order to devote the time needed to get this done.  You can’t develop an “A” process with your “B” team.    This team does not and should not be all upper management.   This needs to be driven as much from the people ‘on the lines’ as from management.  It also needs  a diversity in perspective.  Great ideas come from less experienced but high potential newer people.

Don’t  forget  to ‘Keep it Simple’.  Who buys a Ferrari when a Taurus would do?  The answer is people who have either won the lottery or have otherwise become financially independent.   If you are running a business like that, please give me a call.  The fancy ‘bells and whistles’ aren’t free.  The most obvious price is up front and or monthly service fees.   The more insidious component and what is often not realized until late in the project are the ongoing maintenance required to keep it operating in peak operating condition – just like the Ferrari.   It’s very important to balance the value of the fancy ‘bells and whistles’ against the realities what is needed to do the job and the capabilities throughout the chain.   Avoid creating additional systems with additional maintenance requirements when integrating the data into current systems will do just fine.

Block diagramming or mapping your process from a current and future state perspective is an important exercise BEFORE engaging software vendors.  That way you are defining what software can do for you instead of fitting your process to the software.  You’d be surprised how many companies put this off until afterward and pay the price of a delayed on failed implementation, a swoon in performance and customer service.    Mapping needs to happen to prior to develop the training plan and materials and should be largely independent of the system you choose.  I don’t remember who said “The road to hell is paved with good intentions”, but if you throw software at a bad process you just get to a bad place faster.   If this system is really going to transform your business you need a new blueprint and plan to go along with it.  Don’t miss the chance to lay the right foundation for the future.

Real –time data is critical in tracking material, inventory levels in the chain, ready to build and in performing ‘what if’ scenarios.   Inventory data needs to be very accurate and if you’ve picked the right partners it very well should be.  Lead-time data can be a different issue.   Data can be sent back and forth very efficiently over the internet, but if it’s been weeks since the data was updated, be careful about  the assumptions you make from it.   Do you really need that screen at your fingertips with a real-time update on every part or will a daily or weekly report that is nightly batched and stored on a local server do just fine?

Before you sign the final documents, Test drive the system with data from your own business.   Most of solution providers will gladly accommodate this step.   The limiting issue here is translation and mapping of your data to the target system.   It’s not trivial, but it’s not rocket science either and it’s something better understood before you jump in anyway.  If your IT staff is more comfortable with infrastructure (networks, servers and wires) than application work (the systems and resulting data carried in and around the network) then find a good contractor that will stick with you through the selection and implementation.

 

Pressure from governments, investors and end customers is making environmental sustainability a key business issue facing all organizations today.  Companies must grapple with the issue of how they can reduce their use of energy, water, create less waste and reduce their and CO2 and GHG emissions.  Reducing energy usage and waste is not an easy task.  The rewards can be huge if advantages over competitors can be developed along the way.  Consumers are becoming more aware of what goes into what they are buying and with more disclosure will come more awareness.

The first step on the road to corporate sustainability is to develop a thorough awareness within the enterprise of the issues involved and how they impact the company.  How aware are you on the subject of sustainability?  What is the environmental impact of the technologies and processes in your industry?  Many people are aware there is an issue, but few understand the specifics nor the urgency in a sufficient level of detail nor from a business perspective in meeting the risks and opportunities that sustainability brings with it.

Before you can decide where you need to go, you need to know where you are.  The second step on the road toward sustainability comes from understanding the current situation.  How much energy is being consumed at the various locations and steps within the company processes?  Where is the company in relation to compliance with current regulations and what risks are on the horizon with potential new regulations?   Are there any resource saving projects underway and are there any new projects being considered or suggested?  What key metrics need to be added to the corporate dashboard?   How does the company compare with competitors?  How are they meeting the challenge?

Once an understanding of the current situation has been developed, work can begin on a reduction strategy taking the top resource cost impacts and risks and working down the list.  Are there key technologies ready for adoption that just haven’t made it to the top of the project stack Are you properly recognizing the expected (and increasing) costs of resources in evaluating your projects?   Are you aware of subsidies that could help put your programs over the top?  There is a lot of money out there just waiting for resource saving projects.

It’s important at this stage to identify easy to implement and high impact ‘Low hanging fruit’ projects that can lead to early success and build momentum throughout the enterprise.  Your employees and customers will get the message that you are serious about leading the charge, and properly handled, it won’t be lost on the supply base.   Focused work group projects and Kaizen events are excellent tools to use to get the message out and for developing ideas for new resource and waste saving projects.

For many companies, most of the impact is defined outside their direct control.  Most manufacturing companies cost base is in the supply chain and naturally the highest resource consumption is upstream.  Supply Management must add sustainability prominently to the already complex mix of issues involved in developing and maintaining a strong and competitive supply network.  The good news is that most of the strong companies are leading the charge here and making the job easy.   The bad news is that marginal and weaker companies are at risk of falling further behind or worse.

Do your suppliers know where their impacts are?  Early discussions with key partners when you are in evaluating your current situation are a good idea at this stage.  Their impact may be greater than yours and they may already have a good strategy in place.  Have they completed or do they plan to do Life Cycle Analyses (LCA)?  Those ‘low hanging fruits’ are most often hanging in one of your supplier ‘trees’.  Collaboration projects with major suppliers on new designs and new technologies is a very smart way to lead to major breakthroughs.