ACDI: Integration, Then Acquisition Print E-mail
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Written by Mike Buetow   
Wednesday, 07 March 2012 09:06

ACDI bills itself as the largest electronics manufacturing services company in Maryland. The firm, which was launched as a printed circuit board design bureau, recently acquired Fawn Electronics' EMS operations in Nashville, NC.

CIRCUITS ASSEMBLY editor-in-chief Mike Buetow spoke with ACDi vice president of operations Joe Rogers this week about the integration, the company's strategy and reshoring.

CA: Fawn had been on the market for awhile. How long were you in discussions?
A lot longer than we expected. The talks started around June. Both teams showed great perseverance to get it done.

CA: What made Fawn Electronics the right choice?
The synergistic fit is almost like a glove. The Nashville facility is good in areas where we’re not so strong in Frederick and vice versa. Nashville does a lot of medical; Frederick hardly does any. Nashville is nuclear compliant. We don't have that in Frederick. Nashville has a lot of good cable and harness capability. In Frederick, we have a program that has a lot of cable assemblies that have been sourced outside the country. It looks like we'll be able to bring that in-house.

Nashville has bed of nails testers; we don't have those in Frederick. Nashville doesn’t have flying probe; we do in Frederick. Nashville has auto-insertion equipment for thru-hole. In Frederick we hand stuff our thru hole boards and in some cases have lost market share to competitors with auto-insertion. We look forward to recapturing that business. Nashville is not ITAR registered; we are in Frederick.  The two sites complement each other very well.

Then there's design. ACDI does PCB fab layout, with 10 designers and a combined 150 years experience designing boards. We have all the tools – PADS, Mentor Graphics, Cadence, Altium. We do over 500 designs a year in that facility. They don't offer that service in Nashville. We are looking to put one or two designers in Nashville under the direction of the team in Frederick. Our design team has designed boards with as many as 32 layers and over 10,000 components and with buried/blind vias, stacked vias, 2 mil lines/spaces; it's really leading-edge. That brings a lot to the new customers we acquired through the Fawn Electronics acquisition.

CA: The emphasis on design is a bit unusual for a company your size.
It is a bit unusual, but it’s a big differentiator for ACDI.  We started out as a design company. Our owner, Bill Hornbaker, started the company as a PCB design firm. He grew that business, and then ACDI got into electronics assembly. Although we assemble many products using others’ designs, we always like building products with boards designed by our team. Our in-house  design expertise gives us an advantage in assembly and the feedback the design team receives from manufacturing helps them to continually improve.

CA: How will you load the plants?
In my experience [Ed.: Rogers previously worked for JDS Uniphase, Hughes and other OEMs and has ample experience running multi-plant global operations], I’ve found greater success by using a center-led/distributed approach as opposed to a centralized approach for most of the operations functions. For example, our plan with purchasing, is to keep the purchasing team in Nashville and the purchasing team in Fredrick. We will be center-led – by that I mean we will have a common platform, common MRP, and common policies and procedures. We’ll use common suppliers wherever practical and get favorable pricing from our suppliers by leveraging our total spend across ACDI. On the other hand, sales and finance will be centralized.

CA: I know Fawn was a Juki shop. Do you have a fair amount of overlap in equipment sets? If not, over time will you try to standardize?
We have MyData in Frederick and Nashville has Juki. I have mixed feelings on that. If you look at the Tier 1 guys, you see them attempt to go to a standard platform and it makes a lot of sense. The Juki equipment in Nashville is a little better for medium production runs; not as great for the high mix, low volume jobs. MyData is fantastic for the high mix environment. Longer term, it could make sense to go to a common platform. We do see some value in standardization.

ACDI has been on a triple-digit growth pattern over the last year. We expect to continue along a strong growth path. The good news here is, we are running two shifts in Frederick and could expand to three or even four. We expect Nashville to expand into a two-shift operation this year. At some point we will have to consider additional capital. It would be pretty compelling to stay with Juki in Nashville. They are nearby in Raleigh and the service has been great.

CA: Will the acquisition open the door to new business?
There are some programs we've been trying to pry away from some of our competitors. I think with the lower cost structure we see in Nashville, we may be able to revisit those customers where the savings previously didn't justify the risk of moving the program.

I also want to mention that we are seeing opportunities of bringing production back from China. Certainly the high volume, low mix product makes sense to be in China or Southeast Asia. But a lot of customers are coming to the realization that for medium and low volume products that the anticipated cost savings just aren’t there when you look at the total landed cost - they've struggled with quality issues, the extra inventory in transit, the cost of shipping the product half way around the world – there’s a lot of hidden costs – solving issues is often painful and time consuming when you’re faced with 12-hour time zone differences and 20 to 30-plus hour transit times to go to a facility in the far east.  We are seeing several opportunities to bring back product from Asia. Certainly the cost structure in Nashville makes that option even more attractive. This is very positive story for the micro tier EMS industry.

CA: Which end-markets are you seeing this in?
Except for government work which has stayed in the US to a large extent, we are seeing this across the board.

CA: As you integrate Fawn, would you anticipate other acquisitions?
We are on a growth path. We operate in the micro tier EMS space. It is largely geocentric; most customers are within a couple hours' drive. The benefits of acquisitions are twofold … we can be located closer to OEM concentrations, and we also improve our value proposition which makes us more attractive to customers located throughout the US. We do expect to continue to grow through acquisition, but one at a time. We want to make sure we are focused to ensure we have a smooth integration of Nashville first -- to ensure that our customers continue to have a great experience with ACDI.

Last Updated on Monday, 26 March 2012 10:54


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