Solectron: From Contract Manufacturer to Global Supply Chain Integrator
Brief Case Overview:
In 1977, Solectron was founded in the wake of the solar energy boom, and primarily focused on making solar energy products. They soon began assembling printed circuit boards for other electronic firms. Solectron was located close to Silicon Valley and its electronic industry, so a number of clients were readily available for its manufacturing services. In the early 1980s, Solectron turned their efforts towards contract manufacturing, which turned the job shop business into an important industry. Solectron began to purchase the manufacturing facilities of its customers, which enabled them to sign long-term supply contracts with them as well as increasing supply to multiple other customers. By the end of the 90s, Solectron had three strategic business units- Technology Solutions, Global Manufacturing, and Global Services. Solectron focused their business on superior customer service and respect for the individual. It was through constant assessment and continuous improvement that Solectron was able to earn the Malcolm Baldrige National Quality Award two consecutive times, which was a new record. Solectron continued to lead innovation in technological developments, which continued to increase their advantage over their competitors. In 2000, a softening economy led to falling demand for Solectron services, and at one point, Solectron’s inventory rose to an excess of $1 billion. After restructuring for the slower economy, Solectron was optimistic about its future in developing markets.
What value did Solectron provide to its customers, and how did it evolve over time?
Value Solectron provided to its customers:
Cost – President Dr. Winston Chen insisted that lowest cost could only be achieved with highest quality. This element challenged the practice of their competitors.
Quality – Solectron’s high focus on high quality electronics manufacturing services was reflected in their receiving the Malcolm Baldrige National Quality Award twice. The management at Solectron used the award’s evaluation application process as a benchmark for continuous improvement. All of the recommendations were used in many aspects of the company’s operations for improvement.
Flexibility – Solectron offered a wide range of products in a number of areas to its customers, including Networking, Telecommunications, and Computers. The strategic acquisitions in the early 1990’s allowed the company to have a broad variety of manufacturing facilities and expand the services offered.
Service – The company used the basic principles of superior customer service and respect for the individual to run the company. These principles were evident in their interaction with its customers. For example, they relied heavily on the customer’s input and feedback for continuous improvement and used various measures of customer satisfaction to work towards becoming best manufacturing company in the world.
Value evolved over time:
• Cost – Solectron used their strategy of becoming the premier source of outsourcing for businesses as a strategic advantage. Their volume increased greatly due to their growing number of customers and business. This allowed them to offer reduced prices due to the greater volume purchasing and economies of scale production. • Quality – As production quality can be limited to certain physical features and customer specifications, Solectron has shifted towards a more service quality oriented partner while maintaining product superiority. Although the focus on product quality is imperative to maintaining relations with customers, service quality is a significant source of differentiation in an industry that already expects great production capabilities. • Flexibility – With increasing production demands from customers along with an extensive range of desirable markets, flexibility must be...
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