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The Best Way To Compete With The Chinese

dan21Don’t. Just do what they can’t do instead.

While talking to a friend of mine the other day our talk turned to how American Printed Circuit Board shops can compete against the Chinese and other Asian board fabricators. After an extended exchange he turned to me and said. “It’s very simple Dan, the best way to compete against them, is to not compete against them.” After thinking about this for a few days I now realize that he was right, one hundred percent right. We let them play their game and we play ours.

Sure we are not that good anymore at what they do well, but on the same token they cannot do what we do either.

Look here is what they are good at: High volume low cost production. No matter how hard we try we will never have lower labor rates than they do. Well maybe never their economy is rising rather rapidly. But for the most part they have lower labor, they have more automation, they have more government support and yes they have also more support from our customers, some of our customers, you and I know who they are, the ones who learned technology from us and then sent it over to Asia to combine our technology with their lower labor and then eat our lunch for the sake of building the so called best products on earth with the cheapest circuit boards on earth.

That ship has sailed, we are never going to beat the Asians at this game, we never have and never will. The American companies who have survived and succeeded are the ones who did not bother to complete against the Asians in the first place, but rather looked for things that they could beat them at and then concentrated on those things.

What are those things? The things that we can do better than the Asians. Well let’s think about that for a minute. We are closer to our customers here in North America so shipping our product to them is much cheaper, as much as four times cheaper than shipping product from China to the U.S. Sure I know, I know all about those shipping containers and those slow boats from China and that mode of shipping does help with shipping costs, but it also eliminates the possibility of shipping small quantities fast. They have to have a whole lot of boards to fill those containers so there is no way that they are going to produce and ship five boards and have them to you in twenty four hours. No matter how much they say that can do it, and yes once in a while they can do it, but not as consistently as we can.

That’s right we can build and ship boards faster than anyone outside our country, so yes, that is an distinct advantage that we have over the Asians.

Technology is another one. As long as we can stay ahead of the technology curve we win. This is something that we have always done particularly well in this country and if we continue to focus on technology we will win the battle for that particular market.

So then building tough stuff fast gives us a strong advantage over our Asian neighbors.

Oh here are a couple of other things that Asian’s cannot do. They cannot build military boards, they cannot build mil spec boards or aerospace boards or anything that involves national security and no matter how many companies have tried to breach those compliances the door on doing that was shut nay slammed in the past year when the D.O.D. put our beloved printed circuit boards on the ITAR requirement list. So there. These products are to be built here in the U.S. and anything else is breaking the law. And as I always say do not hesitate to call the FBI whenever you learn of a competitor or even a customer who is trying to turn a blind eye to that fact.

And finally the granddaddy of all advantages we have over our competitors from the East is service. We can out service them any day of the week. Have you ever rejected boards you bought in China? That’s a lot of fun isn’t it? Did you ever try to find out what’s going on with those high tech boards you tried to have built in Taiwan? That’s equally as much fun isn’t it? NOT!

As long as we continue to service the hell out of our customers; as long as we produce what they need when they need it; as long as we keep ahead of the technology curve and as long as we build and deliver boards faster than anyone else in the world we will win. We will live another day we will thrive; and yes with all of the changes that are going on in the world right now; from innovative new product development, to on-shoring to re-enforced ITAR protection we’ll be doing just fine, just fine, it’s only common sense

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Companies That Buy Cheap PCBs Get What They Deserve

dan-6This column is meant for those customers who need printed circuit boards but don’t want to communicate with the PCB shops directly. It’s meant for those customers who believe that a PCB is just a thin piece of green plastic that anyone can build. This is for those companies who feel that the board shops are just job shops and that they should just shut up and build what they’re told to build. If you see yourself here, then read on because it is going to get worse…you’re going to get exactly what you deserve.

If you don’t want your PCB vendor calling with questions, then you’re going to get what you deserve. Here’s the deal; the PCB engineers are calling up to get all their data right and to make sure they deliver the best product possible. They are also calling you to suggest a better way since they have built thousands of PCBs and you have built none. I would warn you to beware of those vendors who never ask you a question because in the end, sooner or later your boards are going to fail and you will get what you deserve.

If you don’t even want to visit a PCB shop because you have no interest, because you feel that you know everything there is to know about PCBs, if you are thinking, “how complicated could it be putting out these little pieces of green plastic?” then you are going to get what you deserve. The more you know about the PCB fabrication process the better you will be able to design your boards. And by the same token, if you think there is nothing to learn, then of course, you are going to get what you deserve.

If you think that all PCB suppliers are the same, that PCBs are a commodity and that it doesn’t really matter where you get them…you are going to get what you deserve.

If you think that PCB fabricators make way too much money and they should let you show them how to really price their boards…you’ll get what you deserve.

If you think that a 28-layer blind and buried via board is a commodity…keep thinking that and yes, you’ll get what you deserve.

If you think that all that matters is price and that your purpose in life is to find the cheapest, lowest-priced PCBs you can get your hands on…you are going to get what you deserve. And I challenge you to go out in front of your customers and let them know how proud you are that your product is made up of the cheapest, lowest priced PCBs you could get your hands on…you will get what you deserve and if those customers buy from you, they will get what they deserve.

If you think that you can buy cheap boards from people who break the rules, people who have no social conscience, companies who bear no ecological responsibilities, or from countries who have no interest in human rights, then you are going to get what you deserve—and good luck looking your kids in the eye when they ask you what you did to help save the world.

But if on the other hand you take great pride in your relationships with your board vendors, if you take their advice when it comes to helping you to design your PCBs, or you ask them for help in providing you with the best possible PCBs to make your end products that much better, if you rely on your PCB vendors to help you with your impedance measurements, your CTE management materials, your thermal controls and all of the other parameters that go into making you products that best they can be, if you make sure that your vendors are following all of the rules when it comes to meeting their specs and qualifications, in meeting ITAR requirements, in meeting EPA requirements, in treating their people fairly and with respect….you will get what you deserve and that will be a good thing…a very good thing. Support your PCB fabricators, look out for them, listen to them, and yes respect them. Look at them as your PCB experts…because after all they are.

Its only common sense.

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To Charge The Most You Have To Be The Best

dan-7Being the best will get you the best prices. You have to be better than everyone else.

You have to be better than everyone else to win the business; not only win it, but keep it. If you are good, very good, you can be good enough to get past the price issue. If your products and your services are better than everyone else’s you can get by the price issue. If your treatment of your customers is so special that they feel they cannot live without you, you can get by the price issue.

Now, I’m not claiming that it is going to be easy nor am I saying that it will happen every time but what I can tell you is that if you are the best in class you will more often than not get your price.

“But, how,” you ask, “can you be better than everyone else? What will that take and in the end is it worth it?” Good questions. I can start off by saying yes, it is worth it. Let me ask you in return, is it worth it keeping customers for life? Is it worth it making a profit? Is it worth it running the best performing company in the industry? Because you see, to be so good that your customers will pay you a better price than they pay anyone else is also being so good that you are performing at the top of your game. You are delivering all of your products on time and you are as close to zero defects as possible.

The road to great customer service is also the road to being a great company, they go hand in hand. And, if you can do everything better than everyone else then you will become a great company.

To be a great company you have to be valuable to your customers. You have to be so valuable that when their nasty bean counter, you know the guy with the green visor and sleeve garters complains that their company is spending five or even ten percent more on your products and services than they pay for your competitors; the people in the company using your boards will yell at him to, “shut up!” Your fans and yes they will be fans will be so in love with your products that they will point out all of the benefits they get from using your products, benefits so far superior to the products they get from you competitors that they refuse, yes they refuse to live without your products and services.

Look, in the real world this is not going to happen in every case. There are still the cheap so and so’s out there who only care about price. You know who they are the ones who know the price of everything and the value of nothing; the ones who claim they are building the best products in the world…by building them with the very cheapest parts that money can buy. You are never going to change those people so why try.

But those customers, the ones who understand Quality; the ones who understand what a good product is; the ones who appreciate great service and most importantly the ones who appreciate all of the little extras you do for them. The help with engineering, the flexible delivery dates, the manufacturability advise, the ship to stock and just in time services you provide, the special way you package the boards the immaculate always perfect documentation you include with the products, the constant availability of your management team, the way you drop everything to help them solve their problems (even if those problems come from your competitors cheap products), the way you look out for them and act s their personal experts and consultants when it comes to your industry, the way you are always looking out for them and yes, the way you put their interests first making sure that they have everything from you that they need to be successful. Those customers are the ones you invest in. They are the ones you target, win, service, and then keep for life.

And you know what? These are the companies who will make you better. These companies, the customers who appreciate and value what you do to the point where they are willing to pay your for what you do well. These are the companies who succeed in business because they treat their suppliers like thy want to be treated and most importantly they are making the truly best products in their market today because they are building them from the best parts money can buy from the best vendors they can find. And that’s because they are buying from you…the best supplier on the market today. It’s only common sense.

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The High Cost Of Cheap PCBs

Dan - another pathI have written in the past about the pride some of our customers have in buying the cheapest products available on the market today, and we talked about how for some reason some companies feel that they can buy the cheapest parts they can get their hands on and then turn around and tell their customers that their products are the best in the world. Now we all know how impossible that is, no matter how much you try, no matter how much hype you try to give it, you just can’t make filet mignon out of chuck steak it just doesn’t work, why, you should just as soon try to make a first in class MRI using the cheapest parts you can find.

Look anyway you cut it, cheap is cheap and cheap is inferior and no amount of spin is going to change that. With that in mind I thought it would be interesting as well as informative to remind you what you get when you go cheap, when good enough is good enough. I thought it would be beneficial to describe the true costs of buying cheap. So I have listed below the true costs that occurs when a board is late; or when it is rejected and returned to you by the customer; or what it costs to remake a board or worst of all the true costs of a field failure.

For those of you who like to bury your head in the sand when buying as cheap as possible I would warn you to turn away, this is not going to be pretty.

What does a late board cost?

Customers who buy quick turn PCB’s do so for a reason. They need their boards on time they need them when they need them and they are willing to pay a premium for that service

If a QTA board is late to the customer:

  1. The customer’s schedule is also late
  2. He misses his date to his customer
  3. He can miss his revenue projections
  4. He can spend more money on overtime to get the boards assembled on the weekend
  5. She has to make other plans and pay twice for the boards
  6. She could miss product introduction
  7. He could miss having the product at a trade show
  8. She could miss time to market and lose out to her competitors
  9. He can hold up a million dollar shipment for few thousand dollar circuit boards on which he saved a few hundred dollars…was it worth it?
  10. The buyer loses credibility with his team
  11. The customer loses credibility with their customer

If a board is rejected and returned by the customer

All of the above issues apply, but on steroids, everything is worse

  1. It takes additional time to get deposition. That’s why getting CARS in time is so important
  2. You Lose all the time to make new boards
  3. You customer Increases chances of missing time to market goals
  4. There are increased problems for you as well. You lose credibility
  5. You have to replace the boards faster than ever and for free
  6. You have increased chances of screwing them up again because you are building them under duress
  7. It hurts your reputation
  8. It hurts your chances of getting more business from that customer.
  9. It hurts your customers chances of getting more business

What does a remake costs?

If you think about the repercussions of losing a part number and having to rebuild it the cost can be exponential. Especially when you specialize in Quick turn PCBs. Think about it:

  1. The cost of that lot to begin with. The materials, labor and time
  2. The cost of the rebuild, the materials, labor and time
  3. The opportunity costs. This remake is taking up a slot that could have been used for another customer.
  4. If the boards are late or you can’t build them in time to meet the delivery date then:
  5. There is loss of premium dollars.
  6. You’ll be paying more for shipping the late boards
  7. You’ll lose the customers good will and possibly lose the customer
  8. The loss of your reputation as a great QTA company which can be discouraging to your associates.
  9. The loss of the ability of your sales people to get more business from that customer.
  10. The loss of customer confidence in us
  11. Then there is the customer, what is the loss to him for us not giving him his product on time. His loss can be huge:
  12. Loss of revenue because the customer cannot ship then end product which is often worth thousands of dollars more than our boards
  13. The possible loss of premium dollars he paid to get components and other commodities in quickly to make deadline
  14. The loss of labor time as he brings in people to work on the PCBs which are not there.
  15. The loss of his reputation
  16. The loss of time to market which is so important in new product development
  17. The possible loss of marketing expenses. Marketing that claimed that his product would be delivered on a set date.

To miss a delivery date is a very big deal at any price Customers pay premium dollars for a reason and often that reason is all about time.

What field failures cost?

  1. All of the above on double steroids
  2. Extremely high visibility (Challenger/ New Boeing Dreamliner)
  3. Lives possibly lost. It can be life or death literally!
  4. Medical? Think about it do you want field failures of medical devices
  5. Can literally destroy your company’s reputation and put you out of business

So think about these things the next time you are tempted by price, the next time you feel that buying that cheap board from Asia, you know the one, the one built buy the cheapest labor money can buy and still not be slavery and ask yourself if this is really the only price you’ll be paying; or if you’ll be paying a much higher price in the end. And then ask yourself if you’re really proud that you were able to use the cheapest parts that money can buy to put into your great product. Are you really proud of that?

It’s only common sense

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Create A Simple Plan And Just Be Tenacious

dan-6It’s amazing how much can get done when you decide to stick with it

Another year another strategic plan…or worse yet another month another strategic plan. Does this sound familiar to you? Well it does to me. The most difficult thing to do when you’re a strategic consultant like I am is to make sure your clients stay focused, that they keep their eye on the ball.

My philosophy is very simple a good plan implemented and followed to fruition is always better than a great plan abandoned before its time.

A good plan has to be given time to work. A good plan is only as good as the commitment and dedication that people are willing to give it.

During all my time in business I have seen good, even great plans abandoned way before they had time to work. I have seen great plans stall when a company leader loses interest in the plan laid out for his company. A plan I must say that he had put a great deal of time and effort in. In one particular case the owner was known for jumping from one project to another leaving a trail of unfinished projects in his wake. Which as you can image created a ground hog day environment in his company. That is some kind of leadership isn’t it?

I think to some people there is something so much more appealing in starting a new plan from scratch than in persevering with the current plan that many companies have been hurt by its” leader’s new plan addiction. Yes, business like life is a marathon not a sprint. There are no quick fixes because yes, even the quickest of fixes takes a certain amount of time to gain traction.

Here is the way it works. A team comes together and puts a plan together. That plan must begin with a clear and complete understanding of where the company wants to be in one year…in three years…in five years. Then this team has to work backwards to today, to present time in order to establish the steps they’ll have to take to make this plan come to life. They have to be fully aware of when the plan will start producing the results they are seeking. These steps should be marked with dated milestones so that the team will know exactly where they should be in the plan and on what date. Done correctly this method will provide a good visionary and yes somewhat patient team with a good idea of where they should be and when they should be there. Without a strong implementation roadmap most plans will fail.

When you set out on a car trip you have to know exactly where you are going, how far it is and when you can expect to get there. You wouldn’t dream of starting out on a cross country trip from say New York City to Los Angeles without first of all knowing how far Los Angeles is from New York City, how many hours it is going to take and yes where you are going to stop on the way for the night. Think of how discouraging it would be if you just set out in a general western direction without any insight of how far you were going or when you were going to get there, and when you were going to have to take breaks. Well now think about your strategic plan as only stating the ultimate goal without any steps on how to achieve those goals. Get the picture?

They say that a journey of a thousand miles starts with one step and of course that’s true but then it takes another step and another step and another one and so on. Without that understanding without the patience to take all those steps the journey will never be completed.

If this sounds basic and obvious it is because it is and it’s pretty simple as well but for some reason people especially business owners have a very difficult time getting it. I think it’s that entrepreneur thing. They are always looking for the next new thing and have a hard time focusing on the thing that is right in front of them. I have also found that this lack of focus and attention has led to the downfall of many companies that would and could have made it if the owners had just had the patience and tenacity to diligently follow the plan as it was laid out originally.

If you are an owner or a company leader and you see yourself in this column, then all I can say is change. Figure out how to have the tenacity, patience and yes courage because it does take courage to follow a plan when it reaches the darkness before the light stage, the courage to stick to the plan and drive it all the way to its successful destination. Its only common sense.

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Do You Tell Your Customers You Buy The Cheapest Parts Possible?

dan-7

It always amazes me that the same people who claim to be building the best products on the market today are also the ones who want to buy the cheapest ingredients they can.

Think of your customers, how many of them have told you this…

“We are building the best Missile, MRI, Automobile, Computer than money can buy and in order to do this we have to have the very best components that money can buy. If you can give us the best there is, the highest Quality there is, we will happily pay for it.”

You have never heard this from any of your customers? Really, no one has ever told you that? I’m shocked. I thought all of your customers, or at least the ones who claim they build the best products in the world would be wanting the best. You would think so wouldn’t you?

Instead our PCB customers like to tell us that they need the best price possible or else. If we do not provide them with the best price possible they will find someone who will, even if that means going yo another country, to find that price that they want.

In other words do whatever you need to do to give them the cheapest boards that money can buy or else. They want us to do whatever we have to do, cut whatever corners we can, do anything we can do, to give them the cheapest products under the sun.

I am amazed at this because sorry, it is just not common sense. When a great chef creates he wants to use the best ingredients that money can buy. If a great artist is creating great art he wants to use the best materials that money can buy. When a craftsman builds a beautiful cabinet he wants to buy the best wood that money can buy. All of these people want to use the very best materials or ingredients that they can.

So how can many of our customers claim that they need the cheapest materials they can get their hands and then turn around and tell their customers that they are building the best products in the world? Sorry it does not add up. You cannot make a great product out of crummy materials, that’s all there is to it.

I know, I know, when I challenge my friends on the buying end of the business about this they tell me that all PC shops are the same, the Quality is exactly the same, the technology is the same. The company has done its homework and they know their suppliers and they know that it will all get down to the price. They actually believe that they can buy the cheapest products possible and still be covered enough to put out the best products in the world.

How is that? How does that work? I can tell you the answer to that question, it doesn’t. You just cannot build the best products in the world by buying the cheapest products in the world.

Think about this:

Do you really want to have a pacemaker that is built from the cheapest components that money can buy?

Do you really want that nuclear reactor to be made up of the cheapest products that money can buy?

Or how about that missile, or that automobile, or that airliner, or that Space Shuttle, or that surgical laser?

Sure you would be really happy if all of these things are built from the cheapest parts possible.

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We Have To Work Together Or Else!

dan-6Two shopkeepers were bitter rivals. Their stores were directly across the street from each other, and they would spend each day keeping track of each other’s business. If one got a customer, he would smile in triumph at his rival.

One night an angel appeared to one of the shopkeepers in a dream and said, “I will give you anything you ask, but whatever you receive, your competitor will receive twice as much. Would you be rich? You can be very rich, but he will be twice as wealthy. Do you wish to live a long and healthy life? You can, but his life will be longer and healthier. What is your desire?” The man frowned, thought for a moment, and then said, “Here is my request: Strike me blind in one eye!”

When someone sent me this joke last week I could not help thinking about the companies in our industry. We are so focused on beating the other guy, that we don’t spend much time working on how we can make our own companies better. In fact, we are always so focused on disrespecting our competitors that we would rather see them fail than succeed. I have noticed that there is usually some satisfaction when we hear that another shop has gone out of business.

Think about this. Should we be happy if one of the few shops left in this country goes out of business…really? We are already feeling the negative results of the steadily diminishing number of shops in our part of the world. The numbers are up for debate but from what I can estimate there were once at least twelve hundred shops in North American in the early eighties and now there are only around two hundred, and that’s individual locations not companies. If you consolidate all the TTM locations under just the name TTM you get even fewer.

This is what has happened while we were cheering the loss of our competitors:

  • We have lost our leadership position in the PCB industry
  • We are no longer the technology leaders we once were (Yes, it’s time to quit telling ourselves that all the technology is developed here in this country because it is no longer true)
  • We no longer have the strong vendor base we once had to the point where if you have a shop in the Southwest or the Northwest you are no longer seeing vendors as often (if at all) as you once did.
  • Which means that we have also lost the technical support we once relied on with having a strong vendor base.
  • Our customers especially the defense contractors are so worried about the sparsity of qualified American vendors to handle their defense and aerospace PCB needs that they are petitioning the DOD to allow them to go offshore, or at least to work through American contract manufacturers who buy their boards from “qualified” offshore sources.

None of this bodes well for those companies that are left. We have two choices, we can keep beating the crap out on one another until there is no one left or we can figure out how to work together and become strong partners instead of weak and weakening enemies. Think about it, maybe it’s time for the remaining companies to circle their wagons and figure out a way to start working together and in a cooperative effort to stand together and make the American Board industry as strong as possible.

Collaborating with one another is the only way to go if we want to make the future ours, heck if we even want to have a future. PCB companies need to find ways to come together and present a stronger front to their customer base.

Instead of cheering for the demise of our competitors we should be making them partners in these ways:

  • Communications: Start talking to each other. Find out what your competitor can do that you can’t and work out an agreement.
  • Share technology research work on new innovations together.
  • Share capabilities: One shop might have via-fill equipment while another has plasma etch by working closing together and doing some bartering both shops will be able to offer both capabilities.
  • Combine your buyer power. Remember the old granges where farmers got together to buy seed and equipment and get a better deal from their vendors? That’s the idea. If four board shops get together to buy four drills from one equipment vendor, they are going to get a much better price than if each buys their own. And they will also have more influence when it comes to having that equipment serviced.

These are just a few of the things that shops could be working together on. If they choose. They say that if you don’t define your future someone else will. Aren’t you tired of someone else determining your future? Don’t you think it’s time you did something about it? It’s only common sense

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