THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : THE GIANTS : Solectron’s Mantra for Success : It’s ‘Faster, Better and Cheaper.’ In just five years, the Milpitas computer circuit board maker has become a global player with more than $1 billion in revenue.
How could a domestic manufacturer with just $140 million in sales in 1989 turn itself into a multinational player with more than $1 billion in revenue in five short years?
“By delivering products faster, better and cheaper,” said Koichi Nishimura, chief executive of Solectron Corp., a computer circuit board manufacturer based in Milpitas.
It sounds simple, but the company’s recipe for success includes painstaking attention to product quality, the manufacturing process and customer satisfaction.
The rewards have been substantial. Solectron placed No. 3 on The Times 100 list of the fastest-growing companies in California by boosting sales 133% in 1993 from the year before while increasing profit by 159%. Analysts expect sales to nearly double again this year, while profit, hit by stiff competition in the industry, will grow at a slower-paced but still impressive 50% rate.
Solectron’s success may be a harbinger of America’s re-emergence as a manufacturing center capable of going head-to-head with lower-cost Asian competitors. While Solectron has operations around the world, the majority of its revenue comes from manufacturing operations in the United States.
Founded in 1977 by former International Business Machines Corp. executives as a small assembly shop, Solectron has benefited greatly from blue chip companies’ efforts to become leaner and meaner. Leading manufacturers such as Apple Computer Inc., Sun Microsystems and Motorola Inc. have their circuit boards built by Solectron so they can focus their resources on more important areas such as marketing and design.
Solectron’s expertise in circuit board production has been confirmed over the past two years as the company has purchased factories from IBM, Hewlett-Packard Co. and Philips in such locations as France, Scotland, Malaysia, North Carolina and Washington state. Many of the plants that were losing money under the management of these leading manufacturers are now profit centers for Solectron.
“IBM hires the cream and trains people better than anybody else, but they underutilize their people and micro-manage them,” Nishimura, a former IBM manufacturing manager, said during a telephone interview from Solectron’s French subsidiary in Bordeaux during a recent business trip. Analysts estimate that Solectron’s costs per worker are as little as half of major manufacturers such as IBM.
But it is the company’s quality products and strong customer service that has had customers coming back for more. Solectron has been using Japanese-style quality control techniques since 1982, before the practice became trendy among U.S. business. And when many U.S. manufacturers abandoned quality circles in the late 1980s as too cumbersome, Solectron used computers to make the process even more effective than in Japan.
Over the past decade, the company has reduced defect rates to three per million products, impressive even by the standards of Japan’s best companies. In 1991, it was awarded the Commerce Department’s Malcolm Baldrige National Quality Award for its system of ensuring customer satisfaction and quality products.
Advanced engineering and motivated workers have enabled Solectron to fine-tune the manufacturing process to a startling degree. Its Milpitas factory, for example, builds 800 different circuit boards every day in average lots of just 50 each.
Solectron’s flexibility enables customers to keep inventories low and make last-minute changes in design and order levels. Two-thirds of its orders typically involve such changes.
“The Japanese don’t want any schedule changes for 30 days” before delivery, Nishimura said. Solectron, however, will sometimes accommodate a customer’s request for changes on the day of production.
Solectron takes pride in its nimbleness. When a Japanese company wanted a prototype of a circuit board for a new disk drive, Solectron completed the task in 13 days--with no errors. “A good Japanese supplier,” Nishimura said, “would have taken six weeks.”
The same mind-set is applied throughout the company. Customers are asked to fill out weekly report cards on the company’s performance in four key areas so problems can be identified and treated quickly. The company also closes its books weekly instead of every three months like as most companies do so that the company can add resources or cut back in certain areas according to market conditions. This required reducing to two days the nine days it previously took to close the books.
Personnel policies reflect the companies manufacturing and customer orientation. Everybody from executives to assembly workers gets bonuses based on quality and delivery. Production engineers are paid more than marketing executives, the reverse of most American companies, to reflect the importance of production.
“In our company, (manufacturing) is all we do, so it’s pretty important,” Nishimura said.
