12/6/2006 | 1 MINUTE READ

The Silicon Valley Approach

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With the electronics content exploding in automobiles, perhaps some automotive suppliers can learn a few things from the consumer electronics, computing, and medical technologies industries.

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With the electronics content exploding in automobiles, perhaps some automotive suppliers can learn a few things from the consumer electronics, computing, and medical technologies industries. One thing: Although products may carry a familiar name brand (e.g., Sun, Cisco), odds are the product—in part of whole—was actually manufactured by a third party. A company like Solectron Corp. (Milpitas, CA; www.solectron.com), which has, since its founding in 1977, been a leader in electronics manufacturing services. Consider this: Solectron achieved a Malcolm Baldrige National Quality Award for manufacturing in 1991. After waiting the required five years, it applied again and got a second. There is a zeal for quality at the company (it has been pursuing a lean six sigma strategy since 2001) that is of the first-order. Given the opportunities in auto, Solectron is working at gaining more customers in Detroit; it has approximately $300-million worth of business with the industry right now. Among the products it is producing are instrument clusters, navigation, engine control units, body control units, and telematics.

One of the things that it has done to help achieve further penetration is to bring on former Delphi and General Motors executive Donald L. Runkle as a senior executive advisor, who is intimately familiar with the way the industry works from the points of view of supplier and OEMs. Runkle’s argument as to why Solectron could be used to leverage a Tier One’s capabilities is not all about straight cost reductions. Rather, he points out that in addition to this reduction:

  1. There is a reduction in required assets. The Tier One doesn’t need to own the factory, people, equipment, etc. What’s more, Solectron could serve as a beta site for new equipment and methods.
  2. There is the possibility of freeing up engineering resources at the Tier One. Rather than concentrating on process issues, the engineers could be working on other issues.
  3. There is protection from volume fluc-tuations. Solectron, which tends to work with multiple OEMs, is able to more readily flux resources than is the case when a company is dedicated to fewer customers.
  4. As David Moezidis, vice president-Automotive, for Solectron puts it, “It is an extension of the Tier One’s manufacturing. There is a lot of value gained from leveraging Solectron, more than just that we can manufacture circuit boards.”—GSV 

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