Venture Outsource talked with Steve Delaney, Chief Executive Officer with Celestica. Transcripts from that discussion follow.
VO: Celestica seems to be leading the industry’s preparedness for RoHS/WEEE legislation. What challenges are still ahead?
Delaney: OEMs choosing product exemption may have difficulty sourcing leaded components as suppliers shift their volume business to compliance. Lean supply chain practices, frequent, detailed communication surrounding demand, and well-documented terms and conditions will help to mitigate their risk.
Another challenge surrounds the high-temperature reliability effects of lead-free processes. We no longer have the benefit of 50-plus years of field reliability data by which to validate products’ reliability performance. Since 1999, in anticipation of these challenges, we have engaged with our customers and supply base, and have engaged in extensive R&D initiatives including performing reliability simulations at the new higher temperatures required for lead-free soldering.
VO: What differentiates Celestica when addressing OEMs’ supply chain management (SCM) needs?
Delaney: A proactive partner, Celestica is as dedicated to supplier quality, lead time reduction, and price performance as our customers are. We’ve invested millions building a strong, global commodity management organization, implementing one integrated commodity management structure and IT platform that aggregates spend for maximum leverage and responsiveness. We are also currently deploying Lean-pull methods to increase supply chain velocity.
VO: Some say Celestica’s restructuring and lean activities aren’t improving profitability to the degree desired. Meanwhile, OEMs want outsourcing partners to manage programs efficiently and effectively and to pass along internal-provider savings. What else is Celestica doing to lower its cost of doing business while also being more price-competitive in the marketplace?
Delaney: It’s hard to believe people are saying that when our operating earnings improved by almost 250 basis points in the last year – the most dramatic improvement in our industry. It’s true, however, that we’ve saved more than we’ve taken to our bottom line. Our customers expect ongoing productivity savings.
Celestica’s lean efforts have provided benefits to OEMs, Celestica, and even the supply base – reducing costs and inventory and improving our customers’ responsiveness. Other cost-reduction initiatives include low-cost manufacturing, design, fulfillment, and after-market services. Celestica can also drive cost reduction through value engineering.
Our recent acquisition of CoreSim, a leader in advanced design analysis and redesign services, enables us to scan boards and reduce costs with minimal involvement from the original designers – providing customers with a whole new cost-improvement trajectory that only Celestica can offer. Our customer-focused business units tie everything together – prioritizing and coordinating initiatives to deliver customized solutions that meet OEMs’ changing needs.
VO: What are your thoughts on ‘execution’?
Delaney: The EMS industry is a service industry, and as in any service business, execution means everything. We measure customer satisfaction relative to our execution in a number of areas including quality, cost, delivery, technology, supply chain management.
VO: Celestica is well-known for high-end expertise. High-complexity systems integration is part of this territory. What does Celestica do differently on the manufacturing floor to help ensure quality and repeatability with difficult-to-build, complex customer programs?
Delaney: Our heritage came from the high-end. Our production system was developed using Six Sigma to provide capability in process and test engineering, the flexibility to manufacture highly configured products within the shortest lead times, and what we call “carrier grade quality” which enables us to deliver “Five 9’s” reliability. Our production system includes SCM execution systems that support high-mix/high-reliability environments. Also, we select global suppliers based on demonstrated product quality and reliability.
A differentiator – we’ve created this capability and supply network in lower-cost locations in Mexico, Central and Eastern Europe, and Asia. Our customers can sleep at night knowing our technical might extends to lower-cost manufacturing regions. We also have the industry’s best laboratory capability and actively participate in, lead, industry consortia initiatives.
VO: Who do you admire (living or dead) and why?
Delaney: I’d have to say that this would be my father, Robert Delaney. Dad retired as CIO of Principal Financial Group over a decade ago. He was one of the pioneers in the IT industry, returning from Air Force duty in the Korean conflict with a Math and History degree to become one of the earliest programmers on the planet.
Computer technology and its use in the insurance industry was evolving quickly, and I grew up spending weekends with my Dad in computer rooms, where I developed a love for all things technology related. He instilled in me the work ethic and performance orientation that I believe is so important in business today.
Despite all of that, he never missed the football and baseball games, gymnastics meets and other important events of his children.
VO: Thank you, Steve.
Delaney: You’re welcome. Thank you.
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