Firstronic and Lacroix took a long-term approach to joining forces, eliminating the usual learning curve.

As a 40-year veteran of the electronics manufacturing services industry, I’ve seen my share of EMS mergers and acquisitions from both sides of the equation. The basic EMS industry business model adds complexity to that equation not found in most industries because EMS companies are an extension of their customers’ manufacturing operations or, in some cases, their entire manufacturing operation. If a larger conglomerate acquires the company that manufactures your dish soap, you won’t notice unless the product’s effectiveness or branding changes dramatically. If your EMS provider is acquired, it’s obvious on day one.

In many transactions, the only consideration of impact to an EMS company’s customer base is visits to key customers during the due diligence phase to enable the acquiring entity to assess whether the business levels they anticipate are likely to continue in the new entity. The alignment of EMS brand/differentiating processes and facility redundancy are often minor considerations.

Strategic conversations are key to sustaining existing business.

The current business environment is creating two significant challenges for mid-tier electronics manufacturing services companies at a strategic planning level. The first is program management workload. Material exceptions have become the norm, and program teams have become highly reactive to respond to changing program variables. Second, material constraints are causing OEMs to keep projects at their current suppliers and push out launch plans on new products. Taken together, planning for account growth beyond what is automatically going in the pipeline based on spikes in existing demand may not be a great use of program management time.

While it is unlikely a significant number of projects will be awarded in the short term, a lot of dynamics in the background make strategically assessing larger accounts an important activity right now. These include:

• The great resignation. While the media may have overhyped it, labor shortages are a reality, and people are moving around as a result. Do you have multiple relationships within each customer’s decision team? If you don’t and your key contact leaves, you will be building a relationship with someone who is viewing your company only from the perspective of the current market.
• Customer chaos. The challenges within OEMs are as great as those within your company. In that environment, they may not be thinking strategically either. Can your company provide services to help address resource shortages within their teams they are unaware of?
• Inaccurate capabilities perception. In a reactionary environment, decisions are made on the fly. In a long-term outsourcing relationship, OEMs can lose sight of the company their EMS provider has become, or assume capabilities are limited to those used in the projects that EMS provider is involved in.
• Growing dissatisfaction. The current market is causing suppliers at all levels to give disappointing news on a regular basis. While experienced supply chain management teams understand what is happening, less experienced personnel may not. If the bulk of program team communication is delivering bad news, or if the ball is regularly getting dropped on issues the EMS provider should be able to control, dissatisfaction levels may be high.
• Cross-company teamwork is high. Many EMS provider and OEM teams are working together closely. The relationships forged offer visibility into opportunities at a higher level than is usually found when team members trust each other.

Given the current workload, the next challenge is determining how this type of analysis can fit into busy schedules. Strategically analyzing larger accounts relative to the dynamics mentioned doesn’t need huge effort.

• Customer contacts. Make a list of the decision-makers you interact with at each key account. If fewer than three, develop a strategy to build a relationship with one to two additional contacts.
• Access what you know about the account. Are there opportunities for increasing the percentage of value-add in the account or growing into other divisions? What are this customer’s pain points? Do they have resource constraints in engineering or production you could help with? Would fulfilling to their end market help free up their team? Is your team doing everything possible to help them with alternate component identification? Has your team failed at anything lately, when they should have performed better, such as in quality, product validation, communication, etc.? Do you have a solution for anything your customer has casually mentioned about new projects or resource constraints? Is the customer aware of your current capabilities? In short, make a list of issues you think would benefit from a focused conversation.
• Address dissatisfaction head on. If your team has fallen down on an aspect of the project they should have been able to control, do an internal review, document the corrective action and present it to the customer as quickly as possible. OEMs forgive issues created by the current market, but they aren’t understanding when they feel internal processes are out of control. The result of this conversation may be improved customer satisfaction, or it may be the realization irreparable damage has been done. Either way, it puts you in a better position to assess next steps with this account in an environment of scarce resources.
• Educate, educate, educate. While it may seem difficult to have a strategic conversation in a reactionary environment, most customers are open to discussions that help solve their problems. An informational or educational approach centered on options for addressing specific pain points is generally welcome. This is also a good way to increase customer knowledge of capabilities or resources. A quarterly business review or similar periodic meeting is one path. If the customer is local, a lunch-and-learn session may be beneficial. If the customer is accessible by travel and open to visitors, a visit with a technical resource may be an option. Ideally, information should open the door to ways your company can better serve the customer and any associated divisions.

When a program manager is prepared, discussions on ways to align solutions more closely with short- and long-term customer needs become easier. Analyzing accounts for opportunities is one way to counter the continuous bad news on the materials front. This type of analysis also helps identify potential vulnerabilities and either address the issue or build the assumption of eventual business loss into the forecast. In the current high-inventory business environment, it is always a good idea to understand which accounts have growth potential and which are quietly planning an exit. 

SUSAN MUCHA is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies, and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services; smucha@powell-muchaconsulting.com.

Tips to avoid burnout while applying resources to mitigate the impact of two years of Covid.

By the time this is published, we will have been working in “Covid new normal mode” for nearly two years, which means EMS program teams have been working under extreme stress for longer than most physical bodies can handle. This is creating two big dangers: physical damage caused by exposure to long-term stress and disappointing customers becoming acceptable because so many variables are outside of the program team’s control.

In the ’80s, one of the management associations I belonged to had a stress management seminar built around the movie Twelve O’Clock High. The movie is set in England in WWII and follows a new squadron commander from his optimistic arrival through his total burnout. The seminar focused on behavior changes related to command stress in situations where the odds were against most crews surviving, including a rise in irritability, an increase in alcohol consumption, insomnia and a breakdown in decision-making. The commander in the movie experienced a physical and mental breakdown.

In the seminar, we looked at coping mechanisms to deal with occasional stress at work. The stress many teams experience today is closer to what was shown in Twelve O’Clock High. No matter how well you do your job, the odds are stacked against you. And, sadly, most of us now know at least one friend or family member who has died of Covid-related complications.

That said, the Covid new normal isn’t going away anytime soon, so thinking about coping mechanisms is important. Here are a few stress-management tips to consider:

• Sugar, caffeine and nicotine provide an energy spike and then depress your system. If you are hitting the coffee pot or candy machine frequently, you are actually tiring yourself out.
• Junk food is easy and convenient to grab when short on time. However, it may be pushing you closer to serious health issues if it is now the go-to meal.
• Alcohol may seem like a stress reliever, but it is also a depressant.
• Long stretches of sitting at your desk are physically damaging.

You may not be able to control the stress of the new normal, but you can control your coping mechanisms. Good coping behaviors include:

• Limit caffeine and sugar intake.
• Focus on healthy eating. It will end heartburn and help with insomnia.
• Plan time for exercise, including lunchtime walks outdoors or around the facility, using home exercise equipment, and building simple stretches into your daily routine. Exercise releases hormones that combat stress and balances out desk time.
• Develop a disconnect strategy that lets you mentally relax:
  • Headphones at lunch or planned break times
  • Scheduled relaxation time during your off hours
  • Scheduled fun activities with family or friends
• Ask for help if you are overwhelmed. Many department heads I know have told their teams to request resources if the workload becomes overwhelming. HR wellness programs often have resources for stress management or counseling as well. Don’t wait until the burnout is overwhelming to explore coping mechanisms.

The second danger relates to the cult of mediocrity. The electronics manufacturing services industry has been built on the idea EMS providers do things faster, better and cheaper than their OEM customers. In the new normal, cost increases are a given, and material and logistics constraints are building frequent customer disappointment into the service equation.

I use the airline gate agent analogy frequently in my articles because it has a similar chaos factor. On a bad weather day, there are two kinds of gate agents: One is customer-avoidant and does the job mechanically with minimum critical thinking or effort; the other communicates frequently and looks for ways to improve the situation in the areas they can still control.

Do something for a few weeks and it becomes a habit. Right now, the new normal habit is accepting customer disappointment as a given. Some things will be out of your control, but in what areas can you improve?

In my consulting business, I see material constraints impacting everyone. Some companies have a little more leverage than others, but none has a magic bullet to change the situation. The one differentiator I see is some companies are actively applying resources to improve areas they can control.

Typical examples include:

• Applying continuous improvement disciplines such as Lean Six Sigma to address higher levels of material-related defects or improve throughput to compensate for material arrival delays
• Developing software tools to increase purchasing’s visibility into material availability and automate searches for available stock
• Utilizing engineering resources to identify more complex alternate sourcing strategies when a standard cross isn’t available.

In short, don’t let the new normal create a cult of mediocrity within your team. Figure out what you can control and then show customers you are improving in the areas you do control to help mitigate the impact of the external chaos. An added benefit of incremental control improvements is stress relief, particularly if you celebrate those small wins as a team.

You can’t eradicate the new normal completely, but you can control how you deal with it. When things start to improve, the EMS providers that have shown they are still trying to go the extra mile will win accounts fleeing the cult of mediocrity. 

SUSAN MUCHA  is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies, and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services; smucha@powell-muchaconsulting.com.

Be quick with customer forecast review meetings when orders slow.

I believe 2022 will be a pivotal year for most electronics manufacturing services (EMS) providers. Material lead-time and availability issues are slightly improving, and supply-chain executives are cautiously optimistic about a return to normal in mid-year as demand levels out and additional chip manufacturing capacity comes online. That said, a return to normal brings its own set of challenges, if past cycles of this nature are considered. It is particularly important for EMS program managers to start considering the issues likely to come with a mid-year pivot:

• Forecasts on some products may drop substantially. While component manufacturers, distributors and EMS companies typically have checks and balances to identify situations where customers have increased forecasts as a hedge against allocation, uncharacteristic demand spikes make those controls iffy at best. Most EMS companies have orders into 2022 and exceptionally high levels of inventory in-house. Any downward trend in forecasts should trigger a forecast review meeting with the customer to determine how rapidly orders and inventory levels need to be adjusted.

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