In February, Electronic Systems Inc. (electronicsi.com) captured
Service Excellence Awards for responsiveness and value for the price.
The Sioux Falls, SD-based EMS company has a history of success in the
SEAs, but vice chairman Leo Reynolds says it's the customer comments
that feed growth and improvement. In late March he spoke on Lean
manufacturing, procurement and RoHS warranty with editor-in-chief Mike
Buetow.
CA: How many employees does Electronic Systems have and how close to peak levels are you?
LR: Electronic Systems has about 250 employees; close to peak
level, but we are at much higher revenue levels because we've become
more productive. ESI has two SMT lines and an automated PTH line, and a
good deal of box-build capability.
CA: What does your Lean Enterprise initiative entail and what changes has it sparked in the plant?
LR: For over two years we've been in a formal Lean mode. We
started by training all associates, which continues with new hires. We
started with some high profile successes on higher impact programs,
which gave everyone a taste for what is possible with the application
of the basic tools of Lean. These tools include mapping a process,
analyzing non value-added steps and redesigning the process. From these
initial successes we went on to apply these principles in all areas of
the operation, including administration and management where we had
some of our biggest percentage improvements. Changes were made in how
we pull and supply materials to the lines, how we process checks and
even how we pay for MRO items.
CA: How did you initiate the Lean program?
LR: We looked at the challenges, particularly from offshore
competitors. Our competitors are the some of the best and the brightest
in industry. In fact, I was at one time a customer of this industry and
was so impressed with the people we dealt with I wanted to be a part of
it. But the waters are fast and deep. We knew we needed to make
continuing and substantial improvements. Lean encompasses the best of
all the programs that came before it: it's really about the elimination
of waste. The decision to go Lean was a corporate decision, and we
hired a manufacturing manager who had a lot of experience in Lean. You
really need that: a Lean champion in a line position, where they are
responsible for making things happen. We also hired an outside
consultant to train Lean principles to all associates, and then later
hired that consultant as an employee. We trained everybody and gave
each team something bite-sized. Using off-the-shelf software, we also
immediately did a value-chain map of the entire organization. The map
rated projects by the amount of resources required and we attacked the
low-hanging fruit first. We had one big project that was extremely
successful. We think that was important because everyone needed to see
that this could produce major results.
We've been careful to call our program Lean Enterprise, not Lean
Manufacturing, because I think a lot of these programs get foisted on
the back of the production people as if they are the only ones who add
cost. In reality the management and touch labor adds as much or more.
We have continued with a Lean steering committee, implementing ad
hoc teams based on individual challenges that appear to have the
biggest benefit. In addition to specific program improvements, we have
lowered our material burden, labor burden and SG&A percentages -
those are improvements that affect our overall ability to compete on
all programs.
CA: What problems, if any, have you encountered with parts that
are mislabeled either leaded or Pb-free? Are you buying direct, or
primarily from distributors?
LR: Electronic Systems took a proactive approach from the
beginning, not necessarily agreeing that RoHS is a good idea, but that
it would be inevitable in some form. We've had an RoHS steering
committee for a year and a half guiding the company in every aspect of
RoHS including component issues, process issues and formal compliance
reporting procedures, none of which is entirely "settled law," as they
say in judicial hearings.
We observed early on that most OEMs were not taking the deadlines
seriously and we felt it was necessary that we be able to guide our
customers through this when the time came. We have presented seminars
to both individual customers and to industry colleagues in preparation
for compliance. We are currently running several programs with full
RoHS compliance and have several more in pilot stage.
As for specific components, several connectors that have been
labeled to be RoHS have failed to withstand the elevated temperature in
the reflow ovens.
CA: What approach to indemnity or warranty are you taking for RoHS compliant product?
LR: We have a formal policy statement that we've discussed
with each customer that lets them know that 1) they still have design
control and must approve all changes, including each new RoHS compliant
part and 2) that they must comply with certain specific time
constraints to ensure availability of RoHS parts and the purging of
existing leaded parts. We will go so far as to scrub the BoM, but the
customer still has to approve it. Many parts have been converted to
lead-free and are shipping under the same part number. When this
happens we note that the part is now lead-free, even though it may be
going into a leaded assembly. Compared to conventional product
warranties, we treat RoHS product as conventional product.
CA: Electronic Systems has won several Service Excellence Awards,
including two this year. What, in your opinion, is the net effect for
the employees and the company of entering awards programs?
LR: First, the reason we enter Circuits Assembly's SEA
program is to get an annual objective, third-party look at our
customer's true perceptions of our organization. We also do a mid-year
in-depth customer service survey. Both of these surveys are part of our
overall customer service program, the results of which feed into our
corporate measurement program. Therefore, the company receives a
benefit whether we win or not. For the associates, it's a great feeling
to know that your work is recognized as superior in some categories
when compared to a national yardstick.
Upon receiving the results, we have an all-plant meeting, and graph
the results and post them. We show our latest scores against our
overall score over the years. We also show our score in each category
compared to this year. It's a main criterion of our corporate customer
service program. Winning is great, but if someone scored you 5 out of 5
you have not learned anything. The value for growth and improvement are
in the negative comments.
CA: As regional player, Electronic Systems is representative of
many North American EMS companies. What do you see as the advantages of
the niche market, and how do you keep up with changes in the broader
marketplace?
LR: The obvious advantage of the niche market is that we can
be more time-responsive than other players outside the region or
outside the country. This is, to some extent, a temporary situation for
a lot of EMS businesses as offshore competitors become more fleet of
foot. Regional players will have to continue to improve quality,
technology and productivity to keep market share.
We keep up with the industry through trade publications like Circuits Assembly, IPC meetings and the SMTA.
CA: How do you find customers?
LR: We use sales reps in the Midwest and have a director of
sales in the Minneapolis-St.Paul area. A lot comes from word of mouth.
Electronic Systems has been in business for 26 years and has a solid
reputation. The Midwest market is a large market but a relatively small
community and word gets around.
CA: Do you ever get overload work from other EMS companies?
LR: We will pick up jobs from larger EMS companies when a
customer isn't big enough for them. In one case where this happened,
the customer was a Fortune 50 company but the program was too small for
the larger EMS company to handle.
CA: Many EMS companies are launching repair depots.
LR: We have always had a fairly significant repair and
refurbishment business. We don't work direct with the Dells or the
Gateways, but typically work with their suppliers doing refurb, and it
is an important business for our mainline customers too. Sometimes OEMs
forget to settle on an out-of-warranty program, and we have helped some
customers design a refurb program. We perform order fulfillment and
ship a lot of finished goods ourselves.
CA: You have spent several years on the board of IPC. As
associations try to keep up with members that are becoming increasingly
global, how should they go about working with related organizations
abroad?
LR: Each trade group has a primary responsibility to its
membership. In the case of IPC, its membership was already global. I
think it's in the best interest of everyone in our business, when it
comes to global business, to engage, engage, engage. I wish I didn't
have as many Chinese competitors, but what are the options? I can also
buy things in that market and that helps me be a better supplier for
some of my customers.
In a technology business you have to be prepared to change. I think
the U.S.-based trade associations have to engage with the overseas
trade groups, and it is way better to get our standards promulgated
around the world than to let others take charge of writing them.
CA: Have you looked into offshore procurement?
LR: A few years ago I took a list of component materials to
Shenzhen. I met with some suppliers, but they weren't able to get
better pricing than I was at that point. We do have several suppliers
there for PCBs. We have looked at having some China suppliers to do
some higher volume assembly work, but so far haven't actually executed
there. |
News 
