The State of Manufacturing & Supply Chain

Graham: Hi, I'm Graham Kilshaw. Well, the supply chain story has been the number one story in electronics industry this year. If you thought 2020 was unusual, well, 2021 has far surpassed that. We're going to talk about the supply chain. And with me today is David Chan, the senior vice president of supply chain and operations at PCI in Singapore. Hello, David.

David: Hello.

Graham: Good to talk to you. First off, could you please just tell us a little bit about yourself and what you do?

David: Okay. My name is David Chan. I'm the senior vice president of supply chain operations in PCI. And so I'm in charge of the entire supply chain organization as far as execution. Okay? To manage the supply base worldwide into supplying the necessary materials and components to the factory.

Graham: And for those people who are not familiar with PCI, can you tell us a little bit please, about the company?

David: PCI is predominantly a contract manufacturer. We provide manufacturing services to many of the big names in the world, okay. They are leaders in their own field. They could be supplying goods to the industry, they could be providing industry-leading cutting-edge equipment, okay, to the industrial world.

Graham: Okay.

David: So we service our customers by designing as well as manufacturing products for them.

Graham: Great. So let's get into the discussion about the supply chain this year. Obviously, the pandemic has had a significant impact across all aspects of the electronics industry, manufacturing, components, distribution, everybody's been affected. Could you talk a little bit first, please, David, about some of the particular supply chain challenges that PCI has experienced over the last 18 months or so?

David: Since the pandemic started 18 months back, we have experienced once in a lifetime, okay, major disruptions to our supply chain. Starting from China, because quite a few of our supply base is in China. So we have experienced, I will say momentary disruptions, not only in the supply of our components, but also in the logistic supply chain. So these two factors have caused quite a lot of upheaval in our industry. And this has caused us to rethink, or rather reorganize quickly, in order to tackle the challenges that we have faced.

Graham: Okay. And so these challenges, do you think PCI, I understand is a high mix, low volume EMS. Do you think the challenges that you experienced were in any way different for PCI or pretty much the same as everyone else?

David: I would say it is very much, probably the same for the industry in general, okay. So whether you are a big contract manufacturer, you're a big OEM player, you will be affected as long as you are in this particular industry.

Graham: Okay.

David: Yeah.

Graham: And so obviously, your challenge, as senior VP of supply chain is to avoid the disruptions or minimize the disruptions and minimize the outages and delays. So could you share with us any approaches David, that you've used that may be different, or maybe a little bit better than some of the other providers? What sort of solutions did you come up with?

David: Okay. Prior to this pandemic, we have always adopted a collaborative approach to develop the supply chain, okay, with our customers in a way that we'll achieve our goals. Our objectives are very simple, we want to have a nimble, reliable, flexible supply chain as well as a competitive supply chain in order to achieve our corporate goals. Yeah. With these factors, we have a designed a supply chain that is pretty much, I would say, we are sheltered from a majority of the problems that faces us.

Graham: So you mentioned then that you took a collaborative approach. Can you expand on that a little bit more? What does it mean having a collaborative approach?

David: Yeah. Okay. So because of the fact that we are a contract manufacturer, some of our products are designed by the customers, some of our products are designed by us. So when we designed the product in the initial design stages, we have identified the competitive as well as the competing supplier.

Graham: Okay.

David: Okay. With respect to the final manufacturing location. And because of that, using that factor, we have taken into consideration all the aspects of manufacturing in the location, plus the logistics to the factory for the final assembly. So with this approach, we have crafted up a very systematic way to manage the supply chain, as well as taken into consideration major disruption. So the COVID-19 has been a real test to our supply chain.

Graham: That makes sense, that makes sense. Does this collaboration approach extend to your customers as well as your suppliers?

David: Yeah. The collaboration is both ways. For example, taking into consideration after we and our customers have agreed upon a particular supplier, we will also collaborate with the supplier to understand their next level of supply chain, in order to develop plans and as well as initiatives to further reduce costs, as well as improve the nimbleness and flexibility of their supply chain. So with this approach, we can pre-empt problems. As well as when the problem starts, we immediately understand, so where will be the bottlenecks as well as the critical areas that we need to focus on in order to emerge, I would say, unscathed in this crisis.

Graham: So David, if you were talking to a potential customer of PCI, somebody who's looking for a new EMS partner in this environment, what kind of advice would you give a manufacturer, an OEM looking to change EMS provider or a new EMS provider right now? As far as supply chain goes, what are some of the questions they should be asking of their potential EMS supplier? What should they be asking?

David: I think first, when we approach any customers, we always look at synergies. So the synergies will be, so-called, evaluated in many aspects. I think the very first one is of course the technical and technological synergies. As long as we have— PCI has the correct technical as well as the technological advantage to help, to organize and design their products. We already have the supply chain developed for the various technical aspects that we have developed within the company. So with this technical and technological synergies in place, so very naturally the supply base that we develop, the supply chain that we have developed is in place.

Graham: Yeah. So staying on the technological side of planning and protecting the supply chain from risk, could you talk a little bit about what kinds of digital tools and other initiatives PCI utilizes to create that protection for your supply chain?

David: So we are based in Singapore and using an ERP-based SAP. We use that as our major system to communicate with our supplier. So with this system, we have other planning tools that is linked to our SAP. We have a network that is linked to our supply base for instant communication. As well as, we also develop competencies within our organization in order to effectively communicate with various regions in the world.

For example, in North Asia, we even have a group based in North Asia to effectively communicate with them as well as to be able to know readily visit them whenever there's a need to. And of course, because we are based in Southeast Asia, we have an organization here, okay, based very close to our HQ in order to effectively manage the supply base that's around the factory.

Graham: Very interesting, very interesting. So yeah, you're using SAP. I mean, I guess, it's vital that you're operating at enterprise level tools to be able to work with the types of customers that you have, right?

David: Right. Yeah. Our customers base is pretty diversified. And because of that, we are in the high mix, low volume, our products also pretty complex and diversified.

Graham: Sure.

David: So that's the reason why it is important for us to have an organization that is able to manage the high mix, low volume, I would say, mid to low volume that our customers, our products belong to. So with this kind of complexity, with the many SKUs that we need to ship, we must be able to have a very effective training tool to be able to reflect the right level of demand, as well as the appropriate level of supply, in order to keep the factory running.

Graham: Great.

David: Yeah.

Graham: Yeah. Makes a lot of sense. Well, David, I appreciate your time, but I got one more question. I mean, at some point the world's going to get out of this pandemic. That will happen at some point or at least we all hope so. So from your perspective, it's been a very unusual 18 months over 2020 and 2021 so far. What are some of the biggest lessons you think we've learned from this last 18 months, as far as supply chain management goes? What can we take away from this and use in the future?

David: I would say we always adopted an evergreen principle. For supply chain, when you are in a stage of, I would say normal production, always prepare for supply disruption. Okay? So that is a principle that we have always adopted, always be very sensitive to that market and be sensitive to so-called impending supply disruption. So the supply disruptions could come in various form. Of course, this year we have seen a major search in demand for electronics. Okay? So in fact, back last year, towards the end of last year, we already sensed there are many, many telltale signs and feedback from the market that actually tells us that the market is so-called “getting tight.”

And this is a principle that we have always adopted. Then while we are in the middle of a shortage, we have to start to prepare for surplus, which means supply is going to catch up and we will end up with excess eventually. So we also have to be very careful right now. So as a, so-called, as a rule of thumb, right now, we are in the middle of shortage, but we must start preparing for the time when the market will end up with excess. And demand may taper off, we don't know, but this is something that the organization going to be poised to prepare ourselves.

Graham: Yeah. Makes good sense. I think we saw some of that rise and fall, didn't we? In 2018 and 2019 for as far as distribution goes where distributors purchased large amounts and then simply didn't need to purchase quite as much in 2019. So yeah, most high rises are followed by a quietening down period. And I think most people are expecting that we will experience that in some shape or fashion when this begins to pass.

David: Right. But I think memories are short for most people. But I think predominantly right now, what I'm hearing is that many of them are going out to confirm that the demand is not double book. Okay, so there is no excessive, I would say, exuberance out there, okay, and no double booking. I think the supply chain itself has learned from the previous years, but there will be some cases where we think that eventually if the supply and demand so-called reconciled by itself, there will be areas of excess. So I think these are the areas that we have to look out for. Because at the end of the day, right? For our business, it's really, really to ensure that whatever come may, we must protect ourselves in terms of exposure. And this is something I believe will come very soon.

Graham: Yep. I think you're probably right, David.

David: Okay.

Graham: Well, this has been very useful. David, thank you so much. I know you're a very busy guy these days, so really appreciate you taking the time to talk with us today. I'm Graham Kilshaw and this was brought to you by PCI.