IW Best Plants Profile - 1998

Solectron Corp. Milpitas, Calif.ByJohn. S. McClenahen An IndustryWeek Best-Managed Companies Award and two Malcolm Baldrige National Quality Awards are among the testaments to excellence on display in the lobby of Solectron Corp.s administrative headquarters building in Milpitas, Calif., a Silicon Valley city five miles from San Jose. However, the large wood-and-glass case full of plaques and trophies, impressive as it is, only validates the remarkable quality of work being done in Milpitas and the nearby cities of Fremont and Newark in a contract-manufacturing facility the company calls the Solectron-California site. Indeed, the 21-year-old, 6,500-employee, nonunion, 1.4-million-sq-ft complex, the cornerstone of the corporations manufacturing operations, garners particularly high marks for quality, production efficiency, and technology implementation. For example, the in-plant defect rate on manufactured components and finished products is an astonishingly low 7 ppm (the median among the IW 1997 Best-Plants finalists was 4,400 ppm). Computerized SPC (statistical process control), Total Quality Management, poka-yoke (mistake-proofing), and failure mode effect analysis are among the quality methods used extensively at Solectron-California, an ISO 9000-certified organization. With an on-time delivery rate of 99.9%, the standard order-to-shipment leadtime for desktop CPUs is one-day, compared with an industry average of five days. An enterprise-wide computing system facilitates the exchange of engineering, new-product-introduction, materiel, manufacturing, post-manufacturing, fulfillment, and financial data among the workforce, customers, and suppliers. The use of planning and organizational software tools has significantly shortened planning-cycle times, allowing volume production to more quickly follow design. Too, they have improved response time to such customer-requested changes as engineering revisions or higher levels of production. And Solectron-Californias Computer-Aided Design Data Integrated Environment system has allowed it to reduce the cycle time for engineering start-up of a new product by a factor of five. But even the companys own well-produced promotional materials dont fully capture Solectron-Californias most distinguishing characteristics: customer focus and employee empowerment. The people at Solectron-California really do strive to delight their customers daily. And perhaps that should not come as a surprise to anyone. Putting the customer first tops the list of the almost-religiously-practiced seven Solectron Beliefs that Winston Chen, the companys first CEO, began crafting when he arrived in 1978. Customer service remains the basic operating principle of Koichi (Ko) Nishimura, Solectron Corp.s current chief executive, president, and chairman. "Customers are first," he says. "My job is to point and shout and to make sure that with the team of people we have here that we grow the enterprise in a systematic fashion [first] for customers." Solectron-California is a contract manufacturer, a global leader in the $89.6 billion electronics-manufacturing-services industry. It designs, makes, and supports products for OEMs that are putting their resources to work elsewhere. Solectron-California is highly protective of its customers identities; Hewlett-Packard Co., Cisco Systems Inc., and Terayon Communication Systems, a small firm, are among the few companies that executives are willing to talk about for the record. Printed-circuit-board assembly is the most publicized of Solectron-Californias activities. But theres much more going on, including the production of supercomputers, videoconferencing equipment, modems, medical electronics, and networking equipment. Solectron-California wont identify the OEM by name, but a computer-peripheral companys story illustrates the kind of problem-solving partnership Solectron-California tries to establish with every customer. The OEM had spent more than six months building a new product. Demand had been generated and orders taken. Retailers were ready to receive shipments. Then, a potentially serious product hazard was detected, and the OEM was without resources to quickly rework the product to meet delivery schedules. Within six weeks, however, Solectron-California was able to analyze the situation, set up a line, assemble and train a staff, disassemble the product, upgrade it, reassemble the unit, functionally test it, repackage the product, and ship 20,000 units to market in time for the scheduled debut. "We are here to service customers," stresses Tom Morelli, Solectron corporate vice president for worldwide human resources. Significantly, Solectron-Californias customers regularly tell their partner how well its doing. Every week, every customer receives a customer-satisfaction form, called a Customer Satisfaction Index Report Card, and is asked to grade on an A-through-D scale Solectron-Californias quality, delivery, service, communication, and overall performance for that week. The form also poses questions about scrap and rework, on-time delivery, inventory management, productivity improvement, and manufacturing cost-reduction. Solectron-California reports its grades from customers consistently run better than A-. Each week, site general managers, senior managers, customer-support employees, and the customer formally meet to review the report card. A grade of C or lower initiates a formal customer-complaint-resolution process. The program manager is required to respond to the customer within 24 hours, and within 72 hours he or she must submit, to the customer and Solectron management, a plan to resolve the complaint. A grade of B- or lower also triggers a quality-improvement process. Importantly, its not one person but a whole team that swings into action when Solectron-California gets less than a perfect grade from a customer. Its powerful proof, but not the only evidence, that at Solectron-California empowerment is decidedly not some abstract, business-school buzzword. Indeed, 100% of the plant workforce participates in teams focused on meeting the business and quality needs of customers. For example, some 65 cross-functional customer-focus teams are charged with making sure the customers product flows through the manufacturing cycle quickly and with ease. Communicating with its customer daily, each dedicated team includes engineers, buyers, production personnel, program managers, quality reps, and sales people. Customer requirements, including contract requirements, are developed by the customer-focus teams along with the customer. And those daily communications involve such things as going over current requirements, and discussing engineering and scheduling changes. "Our stated corporate belief, Customer first, has always been our guiding principle, and every one of our associates understands that," stresses Walt Wilson, president of Solectron Americas. "Our teams follow the will of their customers. Whether its a customer-focus team or a team of workers on the assembly line, that team knows its customers needs and how to provide the best service. Our people believe in putting their heart and soul into building these products. Thats why we are successful." Even as focus teams are directly dealing with customer needs, a business leadership team, consisting of site president Massued Behrouzi and his seven direct reports, is engaging in long-range business and quality planning. And cross-functional quality-improvement teams are planning, deploying, and executing strategies in support of a quality steering team and overall business objectives. And special project teams are concentrating on such specific short-term projects as computer readiness for the Year 2000 or a United Way campaign. Meanwhile, as part of Solectron-Californias continuous-improvement process, employees are benchmarking the facilitys activities, utilizing quarterly performance scorecards, an internal Baldrige Award assessment process, best practices from inside and outside the facility, industry trends, surveys, and, most important, information from their customers. Solectron-California, like the rest of Solectron Corp., is constantly looking for ways to improve its processes. Kim Hyland, corporate director of process and equipment integration, is particularly proud of the simultaneous, double-sided printed-circuit-board assembly process developed at Solectron- California. Solectrons benchmarking also has produced a warehouse-management system, a disaster-recovery process, and a reward-and-recognition program for customer-focus teams. In and around the buildings at Solectron-California, theres a contagious commitment to excellence. Its embedded in the authoritative technical briefings presented in Building 1s conference room by Srinivas Rao, Solectron Corp.s vice president of technology, Howard Stoddard, the companys director of development engineering, and Bill Wissick, director of design engineering. You hear of the commitment to excellence when you don a lab coat and protective heel straps and walk the aisles of the printed-circuit-board assembly area with enthusiastic Jim Spencer, the manager of Building 6s customer-program managers. And you see it downstream from the wave-soldering machine as you watch assemblers carefully carrying out the exacting visual inspections of the boards. You sense the commitment to excellence when Jim Daly, director and division manager for the Complex Systems Div. in Building 13, amazes you with the promise of how quickly product will be coming out of a space that only that morning is getting its electricals and its electrostatic discharge floor. You feel and witness the commitment to excellence as Michael Hewitt, director and division manager, tours you through the Service Support Div. and the Fulfillment Center in Building 15 and explains how everything is done with customer benefit in mind. But the demonstrated commitment to excellence, quite honestly, is not the only thing that makes empowerment a success at Solectron-California. All members of the facilitys workforce benefit from the corporations variable-compensation plan. Payout is based on the attainment of individual, team, site, and corporate performance goals for revenue, profit, customer satisfaction, and productivity. Progress is measured against the quarterly goals on a daily, weekly, or monthly basis. Even temporary contract employees share in the variable-pay program -- through their respective employment agencies. Senior managers -- in Solectron Corp. and at Solectron-California -- leave no doubt that they believe that the people of Solectron-California are what makes the facility work. The workers "are why our customers are happy, why we have the highest quality, and why we continually improve," says Morelli. "But work is not life," he adds. And for that reason Solectron-Californias employees are consciously involved with their community. Solectron-California and its people, for instance, donate time and money to such organizations as United Way (associates alone donated more than $208,000 in 1997), and the Second Harvest Food Bank (associates donated 60,000 lb of food last year). The company offers scholarships for graduating seniors in the Milpitas School District, donates computers, and set up the districts Computer Applications Academy. At A Glance

• 23% revenue growth rate.
• Low 7 ppm in-plant defect rate on manufactured components and finished products.
• 63% reduction in in-plant defect rate during the last five years.
• 100% of plant workforce involved in customer-focus teams.
• Only 3% annual labor turnover.
• Cross-training of production and management employees.
• Two-year productivity increase of 22.3%, based on total annual sales per employee.
• ISO 9000 certified.