As a former IBMer and then founding executive of Celestica, Paul Blom has seen the EMS industry grow up. Now executive vice president, operations at SMTC, where he is responsible for engineering, manufacturing operations and supply chain management on a global basis, Blom spoke with CIRCUITS ASSEMBLY editor-in-chief Mike Buetow about the contract assembler's recent growth, and in particular its focus on the Silicon Valley at a time when Tier 1 firms have downsized their local operations.

CA: You now have one of the larger EMS footprints in San Jose. What makes this the right area for SMTC?
PB: There continues to be an incredible amount of new product innovation in the Bay area. This provides for attractive investment opportunities, both for OEMs and EMS companies. The Silicon Valley area offers an excellent talent base, supporting the launch of new products and exciting new companies. Many of these companies are what I would call smaller to mid-sized, providing excellent fit for the Tier 2 EMS space, and SMTC in particular.

Many OEMs in the Bay Area are looking for local support, coupled with a pathway to Mexico or China, and broader engineering, supply chain, and sourcing capabilities. In addition, we encounter OEMs that have already sourced components in Asia, and that lack the supporting procurement resources to support these supply chains. Through our procurement staff in Hong Kong and China, we offer a compelling solution for managing vendor performance. This always gets the customer's attention.

We find that staff with many of the Bay Area OEMs have excellent experience with outsourcing and have a clear understanding of EMS requirements and processes. This goes a long way to driving efficiency in the outsourcing process, including clarity of requirements, documentation, DfM processes and supply chain collaboration. Having people in the Bay Area who understand how to outsource is an important factor for us.

CA: What makes the Bay Area so special when it comes to supply chain knowledge?
PB: If I talk about the virtual model – take, for example, Juniper or Cisco, they never built factories to build PCBAs. Rather, they went straight to market using EMS. You have many employees who grew up in those companies for years, and because that was their primary business execution model, they know how to work with EMS. Years later, I have the opportunity to meet with some of the same staff from these companies now working in smaller OEMs. They bring the same skills, knowledge and discipline to the outsourcing process.

CA: What are the biggest concerns those who build their own products have about outsourcing?
PB: There are still many companies, especially in the industrial segment,who elect to remain predominantly in-sourced with their electronics manufacturing.For computer and datacom, the early 1990s was provided for a large wave of outsourcing to EMS providers. Telecom’s followed similarly in the mid to late 1990s. Industrial products companies followed in the late 1990s, and the 2000-05 timeframe. There still are a handful of companies in the industrial segment that continue with some level of insourcing – and are questioning this strategy: "Does in-sourcing impact margins and performance?" They hit breakpoints where they need to invest in new equipment, processes and technologies. Often working capital can be used elsewhere for greater strategic benefit to an OEM.

It’s critical that SMTC makes the first EMS outsourcing experience a positive one. Often a customer starts with PCBA outsourcing, then later moves to box build, and where appropriate, end-customer fulfillment. When we do a great job of bringing on board PCBA production, working with OEMs to ensure we support their materials procurement strategies, and collaborate effectively with the OEMs' strategic suppliers, we see the greatest win-win relationships.

Also key to success are SMTC’s global copy-exact manufacturing and supply chain systems. These provide important levels of efficiency as we transfer product manufacturing to lower cost geographies. SMTC leverages common systems and processes, and works with customers to understand where the supply chain and broader relationship requires tailoring and unique services.

CA: When you make an acquisition, do you leave the existing lines intact, or do you start consolidating the newly acquired factory onto the same platform as other SMTC sites?
PB: We recently completed the ZF Array acquisition. Within three months of closing the deal, the SMTC and ZF teams worked to move the ZF supply chain onto the SMTC common systems and process platform. Within six months, all equipment and production processes were consolidated under one roof. For SMTC and our customers,it was important to understand the opportunities to deliver an improved service level and execute on the opportunities within the framework of the consolidation.

What was unusual is that we took the hardware platform from ZF Array – we were centered on Panasonic, they were on Fuji – and we shifted to their platform and purchased another Fuji line to increment up our overall capacity. Given the scale of the ZF Array business, it made sense to move ZF’s existing equipment to the SMTC building and not alter their existing production processes.

SMTC’s contribution included product data management systems, supply chain management systems, and common shop floor control systems. We kept the SMTC Panasonic/Mydata equipment in place to provide for flexible NPI/prototyping. These, coupled with SMTC’s AOI, ICT, flying probe and x-ray capabilities provide for an excellent EMS customer experience.