Those that squeeze suppliers to compensate for internal deficiencies are signing their own death certificates.
In the final moments of home team victories, sports arenas around the US often play the classic Queen rock song, “Another One Bites The Dust.” During recent months, some in our industry would be forgiven for humming a few bars themselves.
First, Rockwell Collins, one of the venerable industry stalwarts, announced the shuttering of its printed circuit board fabrication facility, which supplied the captive and merchant markets, due to insufficient volumes for consistent profits. That announcement was a jolt: Rockwell always seemed to have both the financial pockets and the technology focus to make the plant viable.
Then came the announcement that Endicott Interconnect, arguably the most advanced technology fabricator in North America, had filed for Chapter 11 protection, placing its future in question. Wow!
I am never happy to hear of a fabricator’s demise. While some may view it as an opportunity to pick the bones – either for cheap equipment or customers left in the lurch – I tend to think of all the people who gave their hearts and souls to making each company a success. In the cases of Rockwell and EIT, I am even more saddened. We are not just losing two well-regarded fabricators – something that has happened all too often in North America over the past decade-plus – but their pending demise also sends a sobering message to industry at large. The message: “The pundits are right. Manufacturing PCBs is not viable in North America.” Double wow!
Imagine folks in Washington trying to digest the significance of this news. Their response, if I had to guess, will be to change regulations so the US Department of Defense can more easily procure boards offshore, further pounding the nails in our collective coffins. My bet is that none will believe that “if” our government only understood the level of investment needed, the amount of cash spent to comply with needless regulations, and the difficulty playing on an uneven global playing field, then maybe they could have helped – or at least not contributed to – events that led to the vaporizing American technology base.
Ditto corporate leaders who place quarterly profits ahead of or, worse, do not understand the importance of a vibrant supply chain where collaboration, commitment and respect for others’ capabilities and ongoing profitability enable a better, less-expensive product in the long-term. By failing to understand or ignoring the responsibility they have in supporting a viable supply chain, a self-fulfilling prophecy will take place: no supply base at all.
More alarming than the shrinking supply base – a chronic problem in North America – is the type of companies that are struggling. For years the industry experts have agreed that the shrinking number of fabricators has been caused by lower production costs attainable in Asia. Those companies that shuttered operations in North America tended to be either low-technology producers or very small “bucket shops.” Those same pundits have said that to remain competitive in North America, fabricators had to focus on higher-margin, cutting-edge technology, adding that American OEMs are eagerly searching for domestic high-tech suppliers to “partner” with. The message beaten into us is large OEMs that want cutting-edge technology have headed to Asia not by choice, but because North American fabricators have been reduced to a bunch of low-tech dinosaurs. That makes these two announcements even more alarming.
Rockwell Collins has been around for close to 50 years and is known for providing advanced technology. Backed by a global leader, they have not been cash-starved or lacking talent. If there is a poster child for reinvesting to remain capability competitive, this is it. More worrisome is Endicott Interconnect, whose corporate linage dates back to the early days of electro-mechanical innovation when, as a part of IBM, it saw continual and heavy investment to ensure the facility would remain the electronics technological leader. After their spinout, management at EIT has worked aggressively to retain that niche and produce the highest technology in North America, if not the world. Arguably these two companies are exactly what the pundits say is needed to be competitive globally in our industry: advanced technology and long-term commitment. And yet, despite being the poster children for what is purportedly needed to succeed, “another one bites the dust.”
A collective message needs to be broadcast to the OEM customer base – especially the largest DoD suppliers – that if you pass on your own cost inefficiencies by continually squeezing your supply base, you will no longer have a supply base. If you abuse the technological input from your supply base you need to remain competitive, you will no longer have the input you need to remain competitive. If you don’t start treating your suppliers with real respect – for their ability, investment, talent and support – you will lose the global respect of your customers because your own capability will be diminished.
We collectively need to ensure our customers understand we are all part of a supply chain, a chain that is only as strong as its weakest link. Those that disregard or in any way weaken any link of the chain doom us all.
I hope these two highly respected links in our collective supply chain can be saved. We all need the technology that these two companies have brought. We need larger players with the talent to innovate do just that – innovate. Rockwell Collins and Endicott Interconnect have contributed too much for us to afford them biting the dust.
email@example.com. His column appears monthly.is president and CEO of IMI (imipcb.com);