Susan Mucha
No single “right” answer exists, but the right system will reduce cost and align with customer requirements.

One of the most positive trends I’ve seen in the electronics manufacturing services industry over the past five years is the permeation of ERP, shop-floor control and related systems that truly do let businesses work smarter, even in small, one-site companies. I see this as a huge positive because the complexity of information that must be managed on a day-to-day basis continues to grow.

Several factors are driving this trend. First, the EMS segment has become dominant in electronics production, so most software development firms are incorporating modules customized to the EMS business model, and there is enough competition that affordable systems are available at all tiers. Second, OEMs expect any EMS company they use to be able to link with their systems and provide a full-service manufacturing solution. Third, lead-time and response expectations drive a need for real-time visibility and exception-based systems. Finally, cost and availability of working capital continue to drive Lean inventories and overhead staff.

Years ago, adding a new ERP system was a 12- to 18-month process with packs of consultants analyzing business processes and tweaking software for months before and often after the system went live. Unfortunately, ERP system implementations also provided a good look at which people understood the core processes related to their jobs and which just knew which sequence of screens they needed to follow to do their work. Because of the cost and pain, companies often chose to maintain legacy systems by having IT personnel writing their own code to keep things relevant. Other companies bought core systems and then customized using internal personnel. The quality of the outcome in these proprietary systems was mixed. Companies that focused on patching a legacy system tend to be less efficient than companies developing exception-based systems designed to help their employees better acquire and manage required data. Shop floor control systems saw a similar evolution.

Today, software as a service (SaaS) systems have made it easier for smaller EMS firms to move to higher-end ERP, MRP and/or shop-floor control systems, but the catch is that rapid growth can create sticker shock for companies going this route.

In systems strategy, there isn’t one right answer. A company with highly efficient processes and an IT department developing complementary proprietary systems runs as well as a company with the most up-to-date off-the-shelf systems. The real key to determining whether a systems strategy is a competitive differentiator is how well the systems help reduce cost and align with customer requirements. Some key issues a good systems strategy should address include:

  • Information overload. The challenge in managing the controlled chaos in the EMS industry isn’t simply access to real-time visibility. Systems need to aggregate data in ways that help employees in purchasing, program management, and quality do their jobs more effectively.
  • Early warning. The most effective systems are exception-based, meaning when a condition needs attention, it gets flagged either through color-coding or an email to a person capable of resolving the issue.
  • Scalable. A good system should be able to grow as the company grows and easily adapt as new customers and requirements are added.
  • Transaction reduction. A good systems strategy aligns systems with processes efficiently. Here are examples of systems that help reduce the number of “touches” or transactions needed to initiate processes that don’t require human intervention or collect and aggregate needed data: an ERP system that supports auto-replenishment; a receiving inspection process that collects and stores needed certifications, along with part traceability data; a shop floor control system that integrates configuration management, traceability, quality data collection and any key performance metrics.
  • Inventory reduction. The better visibility a team has into material on order, in-house inventory and kit status, work-in-process, finished goods and customer demand trends, the less “just in case” inventory has to be in place.
  • Employee flexibility. The smaller the organization, the more important it is for employees to be able to multi-task. On the production floor, that often translates to workers moving among different production operations as demand changes. Systems that verify operator certification for that work order and process, plus ensure each operator has the documentation needed to do their job, help facilitate that.
  • Configuration management. More companies are going to centralized digital documentation displayed on workstation monitors. It reduces changeover time, provides better intellectual property (IP) security and reduces the possibility that incorrect documentation revisions will be used. Electronic transfer and verification of documentation also reduces time in the new product introduction (NPI) or transfer of work (TOW) process.
  • Customized reporting. OEMs like to slice and dice data. Systems that support easy customized reporting of quality and device history data help reduce the amount of overhead time spent manually customizing reports. The jury is still out on the value of systems that provide customers with 24/7 visibility into project status. Some companies feel it is valuable, while others indicate it motivates some customers to try to micromanage the supply chain or the production schedule.
  • Business case support. EMS continues to face cost-reduction demands. Systems that provide program management the data needed to build a business case for cost increases, or to hold the line on a price, pay for themselves. Similarly, “what if” analysis tools can help customers understand cost and/or lead-time issues associated with schedule pull-ins or engineering change orders.

Good systems pay for themselves many times over, and the skill with which these systems are deployed is often a point of differentiation and competitive advantage. Aligning systems with processes in ways that help employees work smarter and deliver better value to customers is becoming common practice at all levels in EMS.

Susan Mucha is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies, and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services; smucha@powell-muchaconsulting.com.

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