PHOENIX (Feb. 19, 4:40 p.m. EST) — Electronics contract manufacturer Flextronics International Ltd. estimates it buys five plastic parts for every one it molds internally. So when you consider that the firm runs 1,400 of its own injection presses worldwide, you quickly get a sense of its mammoth scale of operations.
“We purchase $200 million of custom components each quarter,” said Jim Sacherman, senior vice president and chief marketing officer, in a Jan. 28 speech at the Plastics News Executive Forum in Phoenix. He said the company relies on vendors “understanding this new model of outsourced manufacturing.”
Internally, Flextronics has injection molding machines with clamping forces of 25-1,200 tons at eight major facilities. Those are mostly at the company's highly integrated industrial parks in Mexico, Hungary, Thailand and China. The park in Guadalajara, Mexico, for instance, has 30 buildings with many vendors leasing space.
“Our molding capacity is focused on products needing in-line molding,” mostly for lower-technology plastics processing, he said. Examples include printers for Hewlett-Packard Co. and Xbox video-game consoles for Microsoft Corp.
“We tend to go outside when it is anything to do with specialty molding” or out-of-the-norm work, he said. Flextronics is not equipped to handle high-mix or advanced products.
“We like to work with companies with advanced processes and materials,” Sacherman said. A needs to perform on quality, delivery and cost and “be consistent with our corporate culture,” he said.
Flextronics retains 1,500 engineers as consulting designers, including a strong component in Asia.
“If you look at Taiwan as an engineering country, the [Taiwanese] know more about engineering and computers and notebook products than anyone in the world. They are very sound and very good at building and designing products,” he said.
Flextronics' information-technology systems result in instant sharing across disciplines and interests. There is a “constant flow of information right there at your fingertips,” he said.
Flextronics logged six inventory turns per year in 1994 and improved to 12 in 2002.
“A lot of components we buy lose 5 percent of value every month,” he said. “If our 12 inventory turns mean we are only keeping three weeks of inventory on hand and our competitors have four or five weeks, our customers get those 5 percent reductions two weeks earlier than the other guys. That has been a big competitive advantage for us. It doesn't tie up our capital as much.”
Flextronics competes among the largest electronics contract manufacturers, including Celestica Inc., Jabil Circuit Inc., Sanmina-SCI Corp. and Solectron Corp.
Sacherman joined Flextronics via the firm's April 2000 acquisition of Palo Alto Products International Pte. Ltd., a design and manufacturing business he founded.
Flextronics, which is incorporated in Singapore and trades on the Nasdaq National Market, reported a loss of $153.7 million on sales of $13.1 billion for the fiscal year ended March 31.
The firm employs about 95,000, has 100 manufacturing and design locations globally and maintains a major regional headquarters in San Jose, Calif.