Technology Forecasters, Inc.
Strategic Environmental and Manufacturing Consulting
Yesterday’s EMSNow.com lead story was an electronics-industry recovery forecast for fourth quarter this year. The industry will recover — it always does — and analysts’ projections about the timing of recovery are interesting if not always accurate. But the more important question is, what will you sell when demand returns?
Using a down market as an opportune time to innovate is what some of the smartest companies in the tech industry have done. When customer orders return, they have a competitively superior product or service to sell. You might be thinking, “But who has the resources to innovate with the budget cuts we’ve experienced?”
This week I conducted a seminar near Tel Aviv for 45 engineers whose companies’ innovations impressed me: from next-generation human-computer-interface to security products to even automated pool-cleaning units. And during the past year Israel experienced not only the global economic slowdown that affected everyone, but also economic challenges from missile defense, a continuing stream of immigrants, and providing among the best health care in the world. Even though Israel has capable global and local EMS companies, manufacturing is not as popular as innovation; many Israeli companies lean on Chinese manufacturing companies for (at least perceived) cost savings. Innovation is a strength to a fault, in that many foreign-based companies establish think tanks in Israel and manufacture the products elsewhere. But this reputation for in-house innovation is enviable.
Though outsourcing manufacturing is a near-ubiquitous strategy for companies around the globe, let’s take care not to outsource innovation completely. Electronic-product companies’ preference to use original design manufacturers (ODMs) to leverage other companies’ product designs continues to grow. Many mid- and large-sized electronics companies have a steady diet of acquiring companies with innovative solutions; notwithstanding “bargains,” these acquisitions can be tougher during lean economic times. Outsourcing and buying innovation are strategies that cannot stand alone.
Remember that innovation in our industry is not restricted to hardware design. This is an excellent time for innovations also in software (hint–more software than hardware is the way to go) and in organizational processes for the gamut: design, supply chain, manufacturing, fulfillment/logistics, distribution, facilities, human resources, and — yes — the process of innovation itself throughout the company.
What have you noticed about the world’s most innovative high-tech companies, in both rich and poor times?
One of the rewarding aspects of being consultants to electronics-company executives is the occasional opportunity to give away “freebies.” In this instance, I am pleased to report that this week one of our clients asked us to offer to TFI’s network a head start on enterprise-wide sustainability measurement, for free.
If you have not yet heard the term “enterprise carbon accounting” you can rest assured that — as with financial accounting — the smarter the tools and more automated the approach the easier it is to collect, analyze, and make decisions based on the data. Our client wants to work with sustainability champions at a handful of mid-sized-to-large electronics companies who aim to reduce environmental footprint in operations, facilities, product design, supply chain, and logistics.
If you work for an electronics contract manufacturer, electronic-product company, or component supplier (annual revenues of $500 million or more) and you are up to playing a sustainability-pioneer role, I look forward to hearing from you (PGordon@TFIenvironment.com).
Electronics contract manufacturers no longer have the exclusive privilege of operating with low margins;* this year many of their customers — electronic product companies — also are experiencing rare tightening. Not a minute too soon are two “less is more” strategies for adding margin to both types of companies: One has to do with your stuff, and the other with your time.
Corporations habitually buy IT equipment, furniture, supplies for offices and cafeterias, capital equipment, marketing collateral, and product-related materials. Managers fear that if they don’t buy enough stuff to consume this year’s budget, then next year’s budget will be smaller. So the process has been “Buy it, then Use it or Store it.” Employees are starting to get disgusted with how their companies are laying off people while offices and storage rooms brim with unused or underused investments.
Replace the old procurement habit with “Identify the need, then Find a solution” — whether that solution is borrowed, second hand, leased, a service, or a better process requiring no additional stuff whatsoever. CFOs need to start rewarding departments that use “Identify the need, then Find a solution” instead of those tactically following “use it or lose it.”
Cisco had it right when they created CREDO — an online inventory that matches surplus items to identified needs. Several years ago we consulted to a client trying to bring this buying-stuff alternative to other companies, but you can easily create one on your intranet. And expand your thinking to include strategic solutions that avoid opening new facilities and taking on other major expenses.
Secondly, imagine the time we’d free up if we halved the time we spent in meetings. Check out four smart tips to reducing hours (even minutes) from meetings that do not further corporate objectives. Executives can insist on dogged project-management practices, comprising milestones and accountability for accomplishing corporate objectives. Leverage priority-only meetings and on-line tools for collaboration and accountability.
Corporations will not overcome their addictions to buying stuff and holding unlimited meetings until a “less is more” culture is embraced by top management and frequently re-enforced through employee training, fun competitions, and rewards.
Before you run to your next meeting or fill out a purchase requisition, take a minute to share with the TFI network your successes with repairing margins, by leaving a reply.
*Watch for an upcoming post in which we’ll write about notable mid- and smaller-sized contract manufacturers whose margins have actually been good.
It was a very polite team meeting at the facility of one of our Silicon Valley clients, with everyone following the agenda and collaborating on a cost-reduction roadmap. But then the trash talk began, and after that toilet talk ensued. And the turn in the conversation didn’t bother our clients, or my colleague TFI Environment Consultant Danny Salinas, or me. The reason was that we were creating a High-ROI Environmental Roadmap and discussing steps that are good for business and the environment, including minimizing office-generated waste and reducing use of paper and water in the lavatories.
The beauty of talk such as this stems from the multifunctional, multiregional composition of green teams that develop Lean and Green strategies for product design, manufacturing, suppliers, product movement, cafeterias, corporate travel, corporate procurement, employee commutes, and in all aspects of facilities.
Two weeks ago at the TFI Quarterly Forum in Walldorf, Germany, we witnessed nearly a dozen environmental improvements throughout Forum-host SAP’s facilities. Examples include coffee and tea served in ceramic cups, avoidance of air-conditioning owing to smart natural-air-flow design and grass-covered roofs for cooling, solar panels generating 180,000 kw/year from photovoltaics, and rainwater collection for grounds irrigation and — yes — toilet flushes. And beyond the realm of facilities, SAP designs their software products to run on hardware consuming less electricity, and offers solutions to help customers to measure and reduce their carbon footprints. Taken together, SAP’s environmental and cost-savings initiatives cross numerous corporate functions and regions. We think that’s the best way to drive deep cost reductions and environmental benefits (as discussed in our recent TFI white paper).
If you are located in EMEA, consider attending the Design-for-Environment Workshop that my colleague Graham Adams and I are co-leading 22 June near Tel Aviv. It will be a full day’s experience of Leaning and Greening electronic product designs.
So, take a chance and bring up “trash talk” at your next cost-reduction meeting — in a civilized manner, of course. Last week, when discussing TFI’s High-Return Environmental Partnership, the VP of Operations at one of our electronics-contract-manufacturing clients told me, “As you know, every year I need to figure out how to take cost reductions to another level, so this may be one thing that helps us this year.”
What conversations has your green team had that led to significant savings for the company and environment?
Our clients generously call us thought leaders–in an industry where rules, like budgets, frequently change and competitive stakes are high. I thought you might like to know which books have influenced us. This is our first annotated book list, with picks by 6 of the 20 TFI and TFI Environment consultants.
From Chief Economist Matt Chanoff is Predictably Irrational, by Dan Ariely. Ariely is an economics professor at MIT, but reading him isn’t like reading any other economist. His insights into how people place value on goods are well researched, quirky, entertaining, and often mind bending. Each chapter offers the entrepreneurial reader a whole new business model.
TFI Environment Consultant Dr. Kim Allen points to The Ecology of Commerce, by Paul Hawken. Because he refused to accept that business and the environment were a tradeoff, Hawken was a radical among environmentalists 20 years ago. And yet his ideas also push into the realm of truly creative and disruptive business. The Ecology of Commerce offers a daring vision of 21st century business, full of both challenge and hope.
Senior Supply-Chain Consultant Douglas Kent admires how Supply Chain Excellence, by Peter Bolstorff, delivers a 17-week process for diagnosing the health of a company’s supply chain. The handbook is easy to follow and has served as a reference tool for companies in numerous industries.
I recommend Real Wealth of Nations, by Riane Eisler. Eisler sheds light on the true workings of modern economics, which includes not only the market-driven model (as presented in the classic book The Wealth of Nations, by Adam Smith), but also less visible and critical factors affecting business decisions. The chapter “Technology, Work, and the Postindustrial Era” paints our own industry in a different hue. (This pick is from my publisher Berrett-Koehler, whose books consistently widen and sharpen our thinking.)
Logistics Consultant Jon Gilbert chose Collapse, by Jarod Diamond. It’s an eye-opening book about what happens when societies lose track of sustainability. Diamond writes about the end of well-known past societies and the root causes behind their downfalls– the over consumption of scarce resources and lack of attention to environmental degradation. Collapse can spark discussion amongst executives and green teams about business sustainability as well.
Senior Consultant Mike Kirschner not only recommends but also was quoted in Exposed, by Mark Schapiro. The subtitle says it all: “The Toxic Chemistry of Everyday Products and What’s at Stake for American Power.”
Finally, with his second contribution to this list, Matt makes a case for why electronics industry executives would benefit from reading a biography of a Medieval tribal leader. Genghis Khan and the Making of the Modern World, by Jack Weatherford, entertains us while showing how Genghis conquered more land, people, nations, and wealth in his lifetime than did the Romans in four centuries of expansion. His secret to building an empire that endured for centuries was to combine fair mindedness and cold-eyed pragmatism. Rather than imposing his own primitive culture on the nations he conquered, Genghis took the best from each and incorporated it into a nearly global empire, with freedom of religion, rule of law that even he was subject to, better security, freer trade, more prosperity than that part of the world had ever seen, and transportation, communications, and logistics systems that operated over vast distances and trumped every foe. Matt says to read this book for insight into a guy who might well have been the greatest leader humankind has yet produced.
What books have you read that you predict will benefit today’s electronics-industry executives? (If you buy a lot of books, do as many of our clients and I have done: invest in an Amazon Kindle, for convenient, and lower-carbon-footprint reading.)
By Kathleen Geraghty, TFI Quarterly Forum
Here is a priority topic for almost everyone (even optimists). Following our recent webinar, called “Managing through the Downturn,” we had an exchange with participants about signs indicating that a company is overreacting in a downturn-economic environment. We also talked about best practices that can be leveraged to overcome these adverse overreactions.
A common overreaction, which can have negative long-term effects on companies, is making across-the-board decisions to reduce investments, compensation, and head count by the same percentage—in all divisions and functions. Our interviews last quarter revealed a number of corporate-wide directives to reduce expenses or headcount without consideration for the performance of a business unit. There is no denying that cost reductions are necessary and this broad-brush tactic may be an expedient way to achieve a corporate target, but they can be damaging to technology roadmaps and employee commitment–both critical to innovation. Overreactions are also evident when companies take steps that contradict their own long-term strategy. For example, if the strategy is differentiation, then price discounting in the short term could be dangerous.
I believe that overreactions have a few common characteristics. They typically are driven by a person or small group within the company, rather than by a cross-functional team better equipped to consider the wider implications. Overreactions are often based on external input that may be incorrect, or by framing an issue from a biased view. For example, it can be tempting to pattern expense reduction after competitors’ tactics, but instead it may be the perfect opportunity to boldly contradict prevailing trends and demonstrate a long-term commitment to the market and team.
Prevention of the pain triggered by the examples above is somewhat intuitive. While cross-functional decisions–requiring some degree of debate and consensus–take more time, they should defend against overreaction. This of course assumes the company is not suffering from group think as well. Employ thoughtful decision process, according to a disciplined set of criteria, to help guard against this reaction. In an era of vulnerability, even the corporate and operating strategies that establish our market position can be at risk. Communication that reinforces the company’s commitment to these strategies along with the discipline to resist short-term decisions that dilute or contradict them is the optimal response in a downturn or anytime.
At last month’s Green Manufacturing Conference in the UK, led by my colleague Pamela Gordon, a discussion ensued about making investments in both product R&D and operations processes during the downturn. This response makes sense in some instances, because this investment can be a leverage point that will catapult these proactive companies to competitive advantage by the time the down turns up.
What is your company doing during the downturn that will increase competitiveness? How are you combating overreactions?
By Kim Allen, PhD, and Pamela J. Gordon
In the mid-1990s TFI conducted a study for Electronic Buyers’ News about promising new teamwork between engineering and purchasing. Now in 2009 we’ve uncovered a whole new level of collaboration amongst not only these two traditional “silos” but also marketing, R&D, facilities, human resources, compliance, IT, logistics, and other functions. It could be the best answer yet to many an executive’s dream that through teamwork, employees’ decisions would lead to company-wide benefit, beyond that of a particular function.
Today’s organizations are responding to calls from many fronts for sustainability. Regulators are requiring carbon and resource accountability, investors want to know how companies are cutting energy costs, consumers and corporate customers are asking for green products, and employees question why their companies are not composting like they do at home. Suddenly, the abilities to track data across functional departments and share ideas company-wide moves from a dream to an imperative.
Fortunately, more companies are discovering the pleasant surprise that the very nature of environmental and sustainability programs brings about not only cost and resource savings, but also extensive cross-company collaboration. When employees are united in their support of the environment, they begin communicating with people in the company with whom otherwise they would have no contact.
TFI has observed the emergence of this collaboration in its environmental partnership programs. We’ve recently co-written a white paper called “Collective ‘Green’ Wisdom: Environmental Initiatives Evoke Unprecedented Multifunctional Collaboration,” which offers a detailed case study of this phenomenon, along with key success factors in forming a multifunctional “Green Team” and ways to avoid the most common pitfalls.
The client profiled in our white paper expects to save more than US$4 million and 4,000 metric tons of CO2 equivalent during fiscal years 2009 and 2010, which only came about because of multifunctional collaboration. In this time of simultaneous financial challenge and sustainability directives, such an advantage is even more valuable.
What inter-functional, inter-regional collaboration has been fostered by your company’s Green Team? (If your company does not yet have a Green Team, why not?)
By Cathy Dalton, TFI Environment Communications Consultant
Have you read your company’s sustainability report lately? If creation of such a communication has not been undertaken, yet the company is making honest strides toward becoming lean and green, then perhaps now is the time to consider it.
At a recent dinner, the 19-year-old daughter of friends of mine told me that my generation – the baby boomers – and the corporate culture we built caused the threats now facing our environment, and that her generation is left to clean it up. Her comments struck a nerve. Granted, “better living through chemistry” did explode onto the scene in the post-WWII 1950s, and our consumerism grew into a mode of taking whatever we wanted, from wherever we wanted it, and without thought to the materials being used or their potential damage to the environment.
But, as someone who has been working with corporations for thirty years, I see examples daily of how businesses can be part of the solution, agents of change. Illustrations of this are readily available in the sustainability reporting coming out of electronics manufacturing, including the recent Consumer Electronics Association sustainability report (which we were privileged to write and design).
In a study completed in January 2008 on reader response to sustainability reports, the benefits of looking inwardly and assessing sustainability efforts give good reason to build such an effort into individual companies’ environmental stewardship practices:
* Readers use reports to improve their understanding, benchmark against others, and provide basis for further action.
* Sustainability reports impact decisions by investors, customers, and corporate partners.
* The reports overwhelmingly improved readers’ opinions of the reporting companies.
Furthermore, is it just a matter of time before some governments require sustainability reporting of publicly held companies? As shareholder mindset becomes increasingly influenced by socially responsible initiatives in our personal lives, we anticipate an increasing demand for corporate accountability, driving past “compliance-driven” initiatives toward broader corporate consciousness of environmental stewardship and social responsibility.
For our Environmental Partnership program we’ve benchmarked sustainability indicators such as position on the Zero Waste continuum, Carbon Footprints, Greenhouse Gas Emissions, renewable and non-renewable resources per employee, solid and effluent waste per employee, and correlating cost savings. We’ve also seen how this data, in concert with compelling visuals designed for readability, can deliver competitive advantage through positive impact to business reputation.
Do you have a favorite sustainability report — either inside or outside the high-tech industry? What experiences have you had encouraging your company to report on bona fide environmental benefits? Do you require your suppliers to have such a report?
By Jonathan Gilbert, TFI Logistics Consultant
With all of the recent bad economic news, it’s sometimes hard to think of positive effects from all the disruption we’re seeing. Just last week, Dell announced plans to close its largest manufacturing facility outside of the US, a plant in Limerick, Ireland. Most media coverage (such as an article in TimesOnline) focused mainly on the downside and loss of Irish jobs. (More on Dell’s recent troubles.)
What wasn’t mentioned in the stories about Limerick is that there are a lot of folks also applauding the plant closure. That’s because production is moving to Lodz, Poland, in search of lower labor costs and more efficient distribution of products for all of EMEA. The Poles are understandably happy, and so is Dell.
The lesson in all of this is that tough times bring challenges as well as opportunities. We need to be focused on what’s coming up and prepare. For Supply Chain managers, the current worldwide slowdown presents some unique opportunities. Good ideas that might have been tabled in prior years are now of much greater interest. We are currently working on Supply Chain models for several TFI clients, and we see substantial savings and environmental benefits coming from streamlining the flow of finished goods.
The opportunity to consolidate production and shipping at a single European facility must have been a compelling business case for Dell even before the downturn. Hard times made what was just a good idea into a necessary course of action. The end result at Dell will be a much leaner supply chain in EMEA.
More good news for manufacturers is that soft demand has led to reductions in transportation costs. This will allow supply chain managers to retain low-cost manufacturing solutions over the short-term horizon. As an example, ocean carrier Maersk Line recently cut Asia to US West Coast rates by 25%. Other sources stated that Asia to Europe container costs have decreased by as much as an astounding 66%. Air Cargo, Trucking, and Rail have all seen volume reductions, and in some cases similar changes in pricing.
This breathing room will give companies with foresight more time to continue their regionalization efforts, bringing production closer to demand over the longer term. We can view this as an opportunity to “get things right” and set up proper new infrastructure in advance of the eventual rise in transportation costs, rather than doing it quickly and perhaps less effectively in the face of sharply rising transport rates.
While it’s easy to get mired in pessimistic thinking, we must always remember that opportunities arise out of challenges.
Let’s compare notes: What efficiencies have you designed recently to reduce supply chain and logistics costs?
For both budgetary and environment benefits, we have been encouraging our clients to travel less and use technology more — even when learning best practices and getting expert consultation from us at TFI!
We help by holding conferences in diverse regions of the world, combining client visits with public presentations, placing our consultants in numerous countries, and delivering consulting and insights through web-conferencing and teleconferencing. This goes for our consulting and research on manufacturing strategies, supply-chain and logistics efficiencies, and Lean and Green environmental consultations.
I invite you to visit our list of events throughout the year, to see when we will be in a region near you or reaching you via the web. See you soon!
Contact TFI | 2000 Santa Clara Avenue, Alameda, CA 94501 USA. Phone 1-510-601-9107
Copyright © 2009 Technology Forecasters, Inc., all rights reserved. | 
RSS Feed | Friday Best of Blogs
