Global Supply Chain Integrator

Solectron Corporation is one of the leading companies in the electronics manufacturing services industry (EMS). Solectron started in 1977 as a contract manufacturer, but during the years it has been more and more concentrating on offering its customers supply chain integration -related services. Its main business units were in 2001 Technology Solutions, Global Manufacturing and Global Services, supported by the Global Materials Services group; the number of employees is around 60. 000. The company has always strongly emphasized the quality, as well as its corporate culture and values.

Market Review The market situation of Solectron's clients, Original Equipment Manufacturers (OEMs), has been tough since 2001. In appendix 1, we reviewed the net income for Solectron's main customers, i. e. Ericsson, Cisco, HP, and IBM. Following the collapse of IT bubbles from 2001, OEMs started to have difficult times, especially in 2002, three out of four companies were run in loss and IBM's net income was decreased by half. Solectron also suffered from the falling demands which were showed obviously in its financial incomes.

The company was then forced to cut the cost by laying off employees and closing production lines; however, they made still quite alarming losses until today. Nevertheless, the management is able to see brighter future and growth possibilities, especially in Asia. But the question still remains: how to continue in this challenging business environment? In the following we first will give some answers on the case's study questions and later comment more deeply the situation described in the case.

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In the beginning, Solectron was offering mainly the contract manufacturing services; it produced PCB's and other components. Thus, the company" provided little more than substitution for capabilities that its customers already possessed. " But gradually it started to not only to expand its area of operation but to focus on quality and the company culture. Nowadays the main vision of Solectron is to deliver value to the customer through integrating supply chains.

As a supplier and partner, Solectron aims to add value to its customers and to become a source of tactical advantage. Using Solectron allows the OEM to concentrate on their core competencies and gain benefits, which are (according to Exhibit 5) shortened time-to-market, cost savings through the economies of scale and access to important new technologies. Also flexibility is an important issue in the markets with unpredictable demand. OEM's thereby turned to Solectron due to the strategic reasons.

Through the 1990's, Solectron acquired many operations all over the world, and expanded considerably. It is mentioned that "through acquisitions, Solectron (had) developed a global network of facilities located strategically close to its customers and to emerging markets". In other words, Solectron could better respond to the customers' requirements, all over the world. Global expansion has benefited the customers via lower costs and also via the proximity and thus the flexibility of production and distribution.

Depending on the customers' needs and its own location, Solectron can serve it more differentiated. For example, if the customer prefers to outsource its basic production, Solectron is able to do it in its facilities in the low-cost counties, like India or China. However, if the emphasize is on design and the efficiency in the product launch, Solectron has centres in Western countries, near the highly skilled labour pool and the end customer as well.

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