Centex Inc. - a Case Study of Anliv Electronics Manufacturing Service Provider

Centex Inc.

Case Questions

1. What are the critical success factors for Centex? Visit the website of Celestica Corporation (www.celestica.com) to understand the dynamics of this industry and answer this question.
2. Based on the case and the critical success factors in (a), identify the key problems that Centex faces with respect to its supply chain and business processes.
3. As a consultant to Centex, what process improvements and IT system recommendations will you make? In making IT system recommendations, rely on your previous knowledge and the broad functionality of the software tools. We will later examine several software tools such as Enterprise Resource Planning (SAP), Supply Chain Management (i2), Collaborative Product Development (MatrixOne) and Enterprise Integration (WebMethods). You can visit the websites of these vendors to get an idea of the functionality they offer.

Centex Inc^[1].

A Case Study of anliv Electronics Manufacturing Service (EMS) Provider

Centex Inc. is a leader in the electronics contract manufacturing industry^[2]. It manufactured PC Boards for several blue chip original equipment manufacturers (OEM), such as IBM, Cisco, HP and Dell. It has experienced significant growth in revenues during the last few years through the acquisition of manufacturing facilities worldwide. In 1998, Centex owned 22 facilities in the US, Canada, Mexico, South America, Asia and Europe. However, while growth in revenues had been received well by the investment community, Centex CEO John Savage knew that significant challenges lay ahead for the 10 year old company. Many larger electronics manufacturers were looking at reducing costs by outsourcing their PC board manufacturing. John was confident that Centex would be able to get a good share of that business. However, he knew that to remain a viable business, Centex would have to deliver on the cost savings that manufacturers were looking for. One of his focus areas was achieving supply chain excellence. He created a Senior VP position in charge of Supply Chain excellence and hired his longtime colleague from his IBM days, Tom Catalano.

Company Background

Centex was formed in 1988, when a group of Cisco executives from its Toronto PC Board manufacturing facility, decided to purchase the facility and provide contract manufacturing services to Cisco and others.  The purchase was funded through private investors at that time. Within two years of successful operations, Centex did an IPO to finance its aggressive growth plans. Since that time, Centex has grown primarily through acquisitions. Its strategy has been to acquire less profitable but newer facilities from OEMs and turn them around. Centex usually obtained these facilities at a discount from owners who were looking for buyers to offload assets and reduce costs. 

Often, Centex facilities had only one primary client, especially for the first few years after acquisition. Centex usually acquired facilities that were near several electronic manufacturers and aggressively pursued opportunities with these manufacturers to diversify their client base.

Centex provided a number of services for its clients, such as design, prototyping, printed circuit board assembly, full system assembly, quality assurance, packaging and distribution, and repair services. The largest part of its business was printed circuit board assembly (PCBA). The client typically provided the design and often specified the preferred supplier of components. A typical PCBA had several hundred small components that came in reels and other similar packaging. The PCBA was manufactured by two methods. Larger components were sometimes hand placed on the board. A majority of the items such as capacitors, diodes etc. were placed by machines. Newer technology allows components to be placed on both sides of the board by only surface mounting the components. A typical PCB would go through 5 – 7 such machines before completion. While automation was high on the shop floor, operators were needed for hand assembly, to operate the machines, and to perform quality assurance. 

The Project

In August of 1999, John Savage and Tom Catalano engaged Stratlink Inc., a consulting company specializing in management consulting services to technology based companies, to evaluate Centex supply chain operations. The initial focus of the project was on the Boston facility of the company that had been under scrutiny for some time due to lack of performance. Stratlink did a 2 week analysis of the supply chain of the facility. The following sections describe the overall findings.  

Overall Metrics