Executive Briefings

Electronics Manufacturer Can Respond Quicker To OEM Clients' Needs, Now

A conversation with Mike Miller, executive director of corporate business systems at Pemstar, an electronics manufacturing services (EMS) company headquartered in Rochester, Minn.

Founded in 1994 as an EMS provider, Pemstar has grown to a global company with more than 3,500 employees, 100 customers, 11 worldwide locations and 1.1 million square feet of facility space. Starting with something as simple as a sketch on a napkin, Pemstar takes a product from concept to customer, with services that encompass design engineering, automation and test, and manufacturing. Pemstar employs an array of technology to support and enhance these services, most recently adding the RapidResponse solution from Kinaxis, Ottawa, to improve its customer responsiveness.

Q: Can you please give us a profile of Pemstar's supply chain?

Miller: Pemstar has nine facilities. The three in the U.S. are our corporate headquarters at Rochester, Minn., a plant in Austin, Texas, and a plant in Dunseith, North Dakota. We have three plants in Asia, in Singapore, Thailand and China; and three facilities in the EU, in The Netherlands, Romania and Ireland. Our vision is 'from concept to customer,' so we also have quite a bit of design engineering that goes on, but not every site has a design center. Design primarily is done in Minnesota and in Ireland. The decision as to where a product is manufactured depends to a large extent on what the product is. Generally, we have some discretion as to which facility we use, but sometimes our customers want the manufacturing to be as close as possible to their distribution network. Our customers sell the products we make not only in the U.S., but all around the world.

Q: And you are responsible for all of Pemstar's IT systems?

Miller: My responsibility primarily is for Mapics, which is our enterprise resource planning system. We also have manufacturing execution systems, Datasweep in particular. We use Agile for product lifecycle management, and we recently added Kinaxis into the mix. All of these fall under my purview.

Q: What drove the addition of Kinaxis?

Miller: We wanted to improve our responsiveness to and collaboration with customers. This all began about a year and a half ago. At the time, I was in the corporate materials organization, but my background has been in both materials and information technology, along with some general management, so our VP of operations asked me to get involved. Basically, we wanted to enable our operating and manufacturing sites to be able to quickly respond to changes in demand from a customer with what we could and could not do.

At the time, this was very difficult for us and often it would take us a week or more to get a response back to our customers. We would have to do a "load and go," which means we would have to take a purchase order or forecast from our customer, load it into the system and execute it in order to figure out what the issues were. That causes a lot of churn in the entire supply chain, all the way through our purchasing organizations and our suppliers. We call it the yo-yo effect because things move up and down depending on what is happening this week or next week. Because of this, we often were letting our customers know we had issues too late in the game, which creates a very frustrating environment for everyone. So our primary goal was to assist our supply chain and materials teams in being more responsive to our customers. From a top level perspective, we also were looking to improve our inventory turns and our cash cycle times-those things that are important to overall supply chain performance.

Q: How far out do your customers normally give you orders or forecasts?

Miller: It differs. Typically I would say that we get forecasts from customers weekly or every couple of weeks. But, basically, the expectation on their part is that they can change that number up until the time the product ships out the door. So being able to understand our supply chain and see where the issues are when a customer makes a change is extremely critical. We previously didn't have a tool to do that, so we built inventory for the 'what ifs.' That was one of the things we needed to get away from-we want to be able to execute on what we know is going to happen rather than on what we think might happen.

Q: How did you decide on Kinaxis as a partner?

Miller: By the time I got involved, communications already were under way with a couple of vendors. We expanded that to about five different solutions, but two of these were dismissed right out of the gate because we were looking for a technology with an 'always on' MRP. Kinaxis calls this always-on analytics, but the idea is that we can take changes and regenerate the plan in real time. There are not a lot of those types of solutions out there, so this requirement narrowed the field. Probably one of the things that swayed us most heavily toward Kinaxis was its breadth and the number of people in the EMS industry that were using it.

Q: Can you describe how you are using the RapidResponse solution?

Miller: At this point, most of our users are in our planning group. They interface both with our program management and procurement teams. Our goal is to have all of our demand changes going through Rapid Response for analysis prior to being pushed to our materials resource planning (MRP) system, which is part of our ERP. So when new demand comes in, the program manager gets with our planner and they create a scenario, which involves loading the new demand into RapidResponse and doing a very quick analysis of the impact. Sometimes there is no significant impact and things can just flow through just fine with no adjustment. Other times, where there is a significant increase or decrease in volume or new parts are being introduced, then we will want to look at the situation with our procurement team. We now can show the procurement team the issues that were revealed in the analysis and ask them what solutions we can put in place and what delivery date we can give the customer if the existing date is too aggressive. Then we can follow up with the customer within half a day or a day to tell them that everything looks good except for these two or three items and here are the issues on those items we need to address. Often our customers have alternative sources and the issues can be resolved fairly quickly. That is what we are aiming for.

Here is an example. Shortly after we went live with our first two facilities, a customer called with requirements for a number of items in a very short time frame and they needed an answer very quickly. The planner for that program got to our super-user here in Rochester and they created a scenario in RapidResponse where they ran the demand changes. The scenario showed an impact for two buyers, so they got these two buyers involved and worked with them on the issues and they were able to respond back to our customer the same afternoon. The customer was extremely pleased and we got an order for all the items the next day. That really bolstered the growth and use of RapidResponse among our planning team. Before, they would have been looking at a week of work to get that information all put together. Being able to work with our customers in that kind of environment and show them that kind of responsiveness is very satisfying from our perspective. We are giving our customers the service they requested and they are very happy with it.

Kinaxis also has recently introduced a glass pipeline technology that will give us new ways to collaborate and we have some customers that are very interested in this. This solution would allow us to push information to Kinaxis, which would serve as a host, and our customer could just go and pick up the information. There are some issues we need to work out around how much information we want our customers to see, but the way the glass pipeline is structured, each customer would be in a separate server, so there is a very high level of security, from the information I have seen so far.

We think there is a lot of potential there because it would allow us to collaborate at different levels of the supply chain. For example, customers could test out forecasts or new demand loads before they even send them to us. We see quite a bit of excitement in discussing this possibility with our customers.

Q: Have you quantified the benefits you have received so far from RapidResponse?

Miller: The main benefit is our ability to make our customers aware, in a very quick manner, of supply chain issues that could impact them. Time after time we have seen that when we are able to push information to them that they have not previously received, or received at a much later date, it is really a big win for us. Improving our customer satisfaction levels does a number of things. It makes our manufacturing operation smoother because now we are working with customers earlier and agreeing on a delivery date that works well for both of us. It also helps us grow our business since customers that are satisfied typically bring more business in the door-and we are seeing a lot of good activity in that regard.

I have been doing this for quite a while and my belief is the more information you can share with your customers, the more flexible they are going to be with you. Their aim, like ours, is to have a long-term relationship. The better that both sides of the equation can be at managing the supply chain, the better the relationship is, and that shows up in better growth and revenue.

Founded in 1994 as an EMS provider, Pemstar has grown to a global company with more than 3,500 employees, 100 customers, 11 worldwide locations and 1.1 million square feet of facility space. Starting with something as simple as a sketch on a napkin, Pemstar takes a product from concept to customer, with services that encompass design engineering, automation and test, and manufacturing. Pemstar employs an array of technology to support and enhance these services, most recently adding the RapidResponse solution from Kinaxis, Ottawa, to improve its customer responsiveness.

Q: Can you please give us a profile of Pemstar's supply chain?

Miller: Pemstar has nine facilities. The three in the U.S. are our corporate headquarters at Rochester, Minn., a plant in Austin, Texas, and a plant in Dunseith, North Dakota. We have three plants in Asia, in Singapore, Thailand and China; and three facilities in the EU, in The Netherlands, Romania and Ireland. Our vision is 'from concept to customer,' so we also have quite a bit of design engineering that goes on, but not every site has a design center. Design primarily is done in Minnesota and in Ireland. The decision as to where a product is manufactured depends to a large extent on what the product is. Generally, we have some discretion as to which facility we use, but sometimes our customers want the manufacturing to be as close as possible to their distribution network. Our customers sell the products we make not only in the U.S., but all around the world.

Q: And you are responsible for all of Pemstar's IT systems?

Miller: My responsibility primarily is for Mapics, which is our enterprise resource planning system. We also have manufacturing execution systems, Datasweep in particular. We use Agile for product lifecycle management, and we recently added Kinaxis into the mix. All of these fall under my purview.

Q: What drove the addition of Kinaxis?

Miller: We wanted to improve our responsiveness to and collaboration with customers. This all began about a year and a half ago. At the time, I was in the corporate materials organization, but my background has been in both materials and information technology, along with some general management, so our VP of operations asked me to get involved. Basically, we wanted to enable our operating and manufacturing sites to be able to quickly respond to changes in demand from a customer with what we could and could not do.

At the time, this was very difficult for us and often it would take us a week or more to get a response back to our customers. We would have to do a "load and go," which means we would have to take a purchase order or forecast from our customer, load it into the system and execute it in order to figure out what the issues were. That causes a lot of churn in the entire supply chain, all the way through our purchasing organizations and our suppliers. We call it the yo-yo effect because things move up and down depending on what is happening this week or next week. Because of this, we often were letting our customers know we had issues too late in the game, which creates a very frustrating environment for everyone. So our primary goal was to assist our supply chain and materials teams in being more responsive to our customers. From a top level perspective, we also were looking to improve our inventory turns and our cash cycle times-those things that are important to overall supply chain performance.

Q: How far out do your customers normally give you orders or forecasts?

Miller: It differs. Typically I would say that we get forecasts from customers weekly or every couple of weeks. But, basically, the expectation on their part is that they can change that number up until the time the product ships out the door. So being able to understand our supply chain and see where the issues are when a customer makes a change is extremely critical. We previously didn't have a tool to do that, so we built inventory for the 'what ifs.' That was one of the things we needed to get away from-we want to be able to execute on what we know is going to happen rather than on what we think might happen.

Q: How did you decide on Kinaxis as a partner?

Miller: By the time I got involved, communications already were under way with a couple of vendors. We expanded that to about five different solutions, but two of these were dismissed right out of the gate because we were looking for a technology with an 'always on' MRP. Kinaxis calls this always-on analytics, but the idea is that we can take changes and regenerate the plan in real time. There are not a lot of those types of solutions out there, so this requirement narrowed the field. Probably one of the things that swayed us most heavily toward Kinaxis was its breadth and the number of people in the EMS industry that were using it.

Q: Can you describe how you are using the RapidResponse solution?

Miller: At this point, most of our users are in our planning group. They interface both with our program management and procurement teams. Our goal is to have all of our demand changes going through Rapid Response for analysis prior to being pushed to our materials resource planning (MRP) system, which is part of our ERP. So when new demand comes in, the program manager gets with our planner and they create a scenario, which involves loading the new demand into RapidResponse and doing a very quick analysis of the impact. Sometimes there is no significant impact and things can just flow through just fine with no adjustment. Other times, where there is a significant increase or decrease in volume or new parts are being introduced, then we will want to look at the situation with our procurement team. We now can show the procurement team the issues that were revealed in the analysis and ask them what solutions we can put in place and what delivery date we can give the customer if the existing date is too aggressive. Then we can follow up with the customer within half a day or a day to tell them that everything looks good except for these two or three items and here are the issues on those items we need to address. Often our customers have alternative sources and the issues can be resolved fairly quickly. That is what we are aiming for.

Here is an example. Shortly after we went live with our first two facilities, a customer called with requirements for a number of items in a very short time frame and they needed an answer very quickly. The planner for that program got to our super-user here in Rochester and they created a scenario in RapidResponse where they ran the demand changes. The scenario showed an impact for two buyers, so they got these two buyers involved and worked with them on the issues and they were able to respond back to our customer the same afternoon. The customer was extremely pleased and we got an order for all the items the next day. That really bolstered the growth and use of RapidResponse among our planning team. Before, they would have been looking at a week of work to get that information all put together. Being able to work with our customers in that kind of environment and show them that kind of responsiveness is very satisfying from our perspective. We are giving our customers the service they requested and they are very happy with it.

Kinaxis also has recently introduced a glass pipeline technology that will give us new ways to collaborate and we have some customers that are very interested in this. This solution would allow us to push information to Kinaxis, which would serve as a host, and our customer could just go and pick up the information. There are some issues we need to work out around how much information we want our customers to see, but the way the glass pipeline is structured, each customer would be in a separate server, so there is a very high level of security, from the information I have seen so far.

We think there is a lot of potential there because it would allow us to collaborate at different levels of the supply chain. For example, customers could test out forecasts or new demand loads before they even send them to us. We see quite a bit of excitement in discussing this possibility with our customers.

Q: Have you quantified the benefits you have received so far from RapidResponse?

Miller: The main benefit is our ability to make our customers aware, in a very quick manner, of supply chain issues that could impact them. Time after time we have seen that when we are able to push information to them that they have not previously received, or received at a much later date, it is really a big win for us. Improving our customer satisfaction levels does a number of things. It makes our manufacturing operation smoother because now we are working with customers earlier and agreeing on a delivery date that works well for both of us. It also helps us grow our business since customers that are satisfied typically bring more business in the door-and we are seeing a lot of good activity in that regard.

I have been doing this for quite a while and my belief is the more information you can share with your customers, the more flexible they are going to be with you. Their aim, like ours, is to have a long-term relationship. The better that both sides of the equation can be at managing the supply chain, the better the relationship is, and that shows up in better growth and revenue.