SOLECTRON CASE

By: Group 5

Introduction
leading companies in the electronics manufacturing services industry Founded in 1977 Headquartered in Milpitas, Calif. Sales of $10.4 billion in fiscal 2005 More than 50 locations worldwide More than 50,000 employees Spans five continents, in more than 20 countries Two-time winner of the Malcolm Baldrige Award Serving customers in communications, networking, computing and storage, consumer products, automotive, medical and industrial markets more concentration on offering supply chain integration related services emphasis on quality, as well as its corporate culture and values.

Explain how the outsourcing requirements of OEMs evolve during the time period from 1970s to 2001. Did the benefits they derived from outsourcing also change during the same period?
Outsourcing requirements Personal Computer become a Mass Market Product In 1990s rapid growth by the development of internet High Demand for Networking Equipment 1970s low volume production low electronic products requirement 1980s increase in production - personal computer 1990s rapid growth internet. Benefits - Yes Diversification Increase in production More focused

How has Solectrons value to its customers evolved over time?

Acquired many operations all over the world Expanded Developed a global network through acquisitions Strategically located Which enabled it to respond better to customers Global expansion benefitted the customers Via lower cost, proximity and flexibility

Q3. Solectrons corporate culture, and its overriding emphasis on quality, was an essential element of its success. Explain. Solectron cultural development started in 1978, when Dr. Winston Chen joined the company as president. He used 2 basic principles to run the company: Superior customer service Respect for the individual Low cost & high quality CULTURE: Day to day Practice meetings especially for quality. Won prizes The Baldrige award, many quality and service awards. Focus on customer satisfaction.

The Benefits customer satisfaction assurance

Created a new culture Total Customer Satisfaction

Retain customers longer

Become more customer driven

Recognised for excellent service by customers

Used as a tool for management innovation

Increased revenue through existing customers

Solectron won the MBNQA twice

Company Vision, Mission, Beliefs

Vision

Be the best and continuously improve

Our mission is to prove worldwide responsiveness to our customers by offering the highest quality, lowest total cost, customized, integrated design, supply chain and manufacturing solutions through long-term partnerships based on integrity and ethical business practices

Mission

Beliefs

Customer first Respect for the individual quality Supplier partnership Business Ethics Shareholder Value Social Responsibility

The Five Ss
SEIRI
Organization: Distinguish between those things that are needed and not needed. Keep only needed materials at the job site Throw away all unneeded items immediately

The Five Ss cont

SEITON
Orderliness: Put things in the right order in the designed area Store all materials and information in an orderly fashion at all times. tidy, ready to use, organized according to frequency of use A place for everything and everything in its place

The Five Ss cont

SEISO
Cleanliness Problems are more visible when everything is neat and clean Find minor defects while sweeping clean

The Five Ss cont

SEIKETSU
Standardize Clean tools, equipment, and job site immediately after use Equipment that s kept clean runs better

The Five Ss cont

SHITSUKE
Discipline Use and follow standard procedures Follow company rules and regulations Follow safety procedures at all times

The Five Ss

Solectron Global expansion

Through acquisitions, Solectron (had) developed a global network of facilities located strategically close to its customers and to emerging markets. Solectron could better respond to the customers requirements, all over the world Global expansion has benefited the customers via lower costs by the flexibility of production and distribution.

Contd
Depending on the customers needs and its own location, Solectron can serve it more differentiated The IT-systems and ERP-systems was integrated, because they are a very important element for Solectron as a supply chain integrator

Technological development Web

Publishing Supplier
Supplier /Customer info thru the WEB

Sites

WW Matls Date
PDM
Connectivity
Customer Shop floor Control

Report writer

Core ERP Applications: Materials Manufacturing Finance Service

Multisite Integration Model Ware house Mgmt. system

Fast what if

CRM
Other Financial Apps

Financial Consolidation

 Solectron introduced a new Business Model purchased manufacturing sites from IBM. Model was repeated many times, and Solectron rapidly grew. It acquired manufacturing facilities from customers, and used those to fulfill long-term supply contracts. It allowed for risk pooling, as fluctuating demands from different companies were smoothed, and safety stock levels of common component inventory could be reduced

Solectron introduced new business model of acquisitions in 1992

 Assign An Integration Team (4 to 8 members) Consists of Finance, Human resources, operations, Materials, IT Acquisition Business Integration Checklist Work with acquired company for 3 to 6 months Until the new employees acting as a Solectron resource

How did the company successfully integrate these acquisitions?

Solectron change its organizational structure to facilitate end-to-end supply chain management
Technology solutions
Modular & embedded systems design manufacturing systems offering a wide range of memory. Acquired force computers in 1997 SMART Modular computers in 1999

Global manufacturing
Provide new product introduction services & pre-manufacturing capabilities. Acquired Fine pitch tech. in 1996 to work with small emerging industries that required quick prototyping & high level of engineering support in order to launch products.

Global services

Global Service
Logistics -Channel Returns -Exchange -Fulfillment & CTO -Service Parts Logistics

Repair -Like-Unit Repair -Same-Unit Repair -Field Service Repair

Recovery & Remarketing -Asset Recovery -Remarketing -e-waste

Examine the drivers that led to the difficult situation Solectron faced in 2001. Wrong Forecast
They estimated far more than, even the most optimistic scenario.
The OEMs Pressure to meet their production demand. Solectrons Consumer First belief further worsened the situation.

Economy meltdown
Late 2000 & Early 2001, demand started to fall. Important customers like Telecommunications. Orders fall from $6.5 billion --> $2.1 billion.

Increase in inventory levels

Received orders from 4000 suppliers of Solectron.
Inventory rose by $ 1 billion.

MEASURES TAKEN BY COMPANY DURING 2001

IN THE SHORT TERM Restructuring Workforce reductions Facility closures IN THE LONG TERM The use of outsourcing as an OEM strategy continued to accelerate

SHORT TERM MEASURES SUGGESTED BY US

Cost reduction - e.g. cost of sales seems to be very high Combine facilities by geographical location or business function, e.g. in European market Solectron has its global operations device in Germany, France, and Hungary; global service in France; micro systems in Belgium and England; technology solutions in Germany; some of them have to be combined or shut down upon real situation and evaluation Pay attention to the balance of global presence and proximity to the customers and resources.

LONG TERM MEASURES SUGGESTED BY US

Capitalize on Industry Growth Trends Concentrate on Core and Emerging Markets Uncompromising Quality Efficiency and Cost Competitiveness Strategic Relationships Align Services to Improve Customer Supply Chains Advanced Technology Processes Diverse Geographic Operations

THANK YOU