CHIHUAHUA, MEXICO -- Continued layoffs are expected at SMTC's manufacturing site here as the company attempts to make the operation more efficient and cost-effective.

The 215,000 sq. ft. site, SMTC's largest in terms of size and volumes, there with regard to cost and overhead structure. And so Mexico it being our largest facility and a very substantial portion of our revenue is important.

SMTC took a $3.2 million charge in its most recent quarter due to longstanding inventory problems at the campus.

"The other facilities are performing fairly well and so therefore we feel very good about China, we feel very good about San Jose. Mexico has been the focus," said vice president of finance Greg Gaba. "The cost-cutting program is very aggressive and we have been taking out a substantial amount of headcount and we’ll probably see that happening through the course of next year, the large amount of people coming out came out in the first quarter and every quarter through the remainder of this year."

SMTC has not publicly disclosed the number of employees let go at the Chihuahua operation, which is unionized, but the company's overall head count dropped from 2,220 workers at the end of June to 1,800 at the end of December.

The site's issues stemmed from poor management practices in which scrapped product was discarded without proper adjustments made to the inventory system.

"[Defective boards stacked up and during the year rather than actually scrap those with a scrap and taking the charge and literally just scraped it and send it out the back door and there was no record of the inventory going out," Gaba said. "So that was a major problem, we had there over work orders on inventory that didn’t exist in the building. So we had a combination of bad skills, combination of a new product mix and a combination of just throwing bodies at it to try to figure it out."

Direct and indirect labor costs at the site rose between $4 million and $5 million from 2012 to 2013 as the site grew, he added.

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