The Virtual OEM

More and more organisations are outsourcing their manufacturing to contractors like Celestica. In fact, according to a recent poll conducted by US-based industry analyst Bear, Stearns and Company: “84% of OEMs intend to increase their use of EMS [Electronics Manufacturing Services] providers over the next 12 months to manufacture their product lines.” Greg Lake, the company’s vice president information technology Europe, advises that a strategy based on, “design collaboration and supply chain leverage” has brought business benefit to the Celestica. The company employs over 22,000 people across 33 global sites, and boasts an annual sales turnover of $5.3 billion in 1999. The group’s activity ranges from design and prototyping services, through to assembly, testing, packaging, distribution and post-manufacturing support. The European headquarters is based in Kidsgrove, UK, and employs over 2,000 people. The plant focuses on printed circuit assembly, although there is also a large design facility at the site. The company’s business comes mainly from the electronics and telecommunications markets, with customers such as IBM, Hewlett Packard, Sun Microsystems, Motorola, Cisco Systems and Lucent Technologies. This means it deals with a wide range of products: from servers and workstations, through to pagers, fax machines and laser printers. Industry analysts agree that, by 2003, the EMS market will include a top tier of providers (three to five companies in total) who provide a full range of services to clients, with customer integrated IT and design solutions, and strategic partnerships with customers. And Celestica aim to be top of that tier. So what sort of IT strategy has Celestica developed to survive and thrive in this fast-emerging, competitive market? Lake believes that IT has a very important role to play in making the company more competitive. “Our use of IT is critical to our success … simplified architecture, ease of use, ability to enable the speed of change, effective integration and timeliness of information are paramount.” He advises manufacturers to, “continue to invest in IT infrastructure, which maximises return for yourself and your customers.” Consider the pressures that face a company like Celestica: these days, a mobile phone or PC has a lifespan of perhaps only six months. That means time-to-market and managing new product introductions (NPI) are key issues. In addition, Celestica aggressively acquires new businesses in the electronics industry, and so integrating new IT systems with existing ones is also paramount. Lake explains that one of Celestica’s most important business drivers is: “having a single face to our customers and a rapid acquisition integration strategy.” With this in mind, Celestica’s IT philosophy is based around four main strategies: using business driven solutions; leveraging IT commonality and best practices throughout the company; facilitating collaborative relationships; giving employees real-time access to information assets; and focussing on enabling a seamlessly integrated supply chain. Lake continues: “we like to implement business solutions on a global scale, with dedicated teams and rapid deployment consulting. We also regularly talk to industry analysts in order to keep abreast of market developments, and to get the best and brightest thinking.” Lake also points to, “implementation in stages,” as a key strategy, particularly for large manufacturing companies. He also suggests frequent, small, three to four-month pilot implementations, with careful cost-benefit analysis. Lake explains further: “ROI is crucial - only if the pilot proves to be beneficial to that area of the business, will we then roll-out the solution globally.” So what elements are included in Celestica’s IT strategy? The preferred ERP (Enterprise Resource Planning) software at Celestica is SAP R/3 or BPCS. On the production scheduling side, Celestica uses an APS (Advanced Planning & Scheduling) system from i2 Technologies. Lake describes the system as: “an instantaneous MRP system, which also allows us to map out various scenarios to see the effect they would have on our business. We share our planning cycles in real-time with suppliers, but this does require collaboration and complete trust between parties.” To enable true design collaboration, Celestica uses US-based Alventive’s software. “Alventive provides a comprehensive solution to the design challenge by putting the customer at the centre of the process. Instead of grafting collaborative capabilities onto an existing CAD system, Alventive has made the design process truly customer-centric,” says Art Cimento, Celestica’s senior vice president corporate strategies. The company is also experimenting with on-line bidding solutions (from Ariba), and has also recently signed a deal with US company, Partminer, to use it’s online marketplace, Free Trade Zone. The strategic partnership enables Celestica to source components which are in short supply, while maintaining low inventory levels. This means Celestica can fulfil global orders from OEMs faster and more cost effectively than was possible before.