Venture Outsource talked with Christopher Janssen, Managing Director with GPC Electronics. Transcripts from that discussion follow.
VO: Please tell our readers what differentiates GPC from other Australia-based EMS providers?
Janssen: GPC services international OEMs. GPC has a history of managing complex, sole-sourced, box-build projects for MNC OEMs.
VO: Price is not the only consideration for OEMs when selecting an EMS partner. Meanwhile, compared to larger, tier-1 and tier-2 providers with greater economies of scale, how can GPC attract customers while managing a profitable PPV (purchase-price-variance)?
Janssen: One word. Management. The biggest complaint we hear from customers is they use a lot of their own resources to manage their EMS partners – even the big providers. GPC competes by managing technical and commercial issues for our customers. Most of our customers do not have to visit our factories to resolve issues. This means we reduce the overhead cost of managing a supplier and end-up with an overall lower cost. This is especially true for more complex products. We can do this because Australian salaries for technical and management personnel are typically 60% of those in North America or Europe. This provides our customers a lower ‘management cost’ by reducing their need for expensive in-house supply chain and program staff. GPC can manage complex or high-mix projects competitively.
We typically build-to-order and we are able to provide customization of those products within a very short elapsed time. Normally, we will plan against forecasts, but build products from component-to-packaged-product within four weeks of order. Increasingly, we find the price of materials is similar across the world and companies. We don’t see the tier-1 providers achieving better procurement terms than we can on projects we have worked on.
Furthermore, cost blow-outs are limited because we manage the desired outcome for our customers rather than waiting for instructions at task-level. This allows us to provide a lower risk solution with less risk of inventory obsolescence; lower risk of delivery slippage, and less logistic delays, or cost premiums for order expedites. Add to this, we operate in an English-speaking country ahead of the Asian time-zone with good infrastructure and good IP protection. Air freight costs from Sydney are cheaper to Europe or North America than out of most Asian centers with high frequency to most locations. To help support this, GPC invests in IT infrastructure, having implemented SAP across the company.
VO: Can you tell our readers what trends you see developing in Australia’s EMS industry?
Janssen: More OEMs need to get products reliably in very short lead-times. Most work has focussed on getting the manufacturing processes streamlined and reducing unit cost and cycle times. As this is being achieved, opportunity for further unit cost reductions in this area becomes smaller. The next push will be to outsource management of the business processes of supply chains. This can provide the next level of cost savings and flexibility.
I have read articles indicating U.S. and European executives have not yet shifted to this but, have instead, focused on direct labor and improving working capital. Executives who outsource extensively with the right partner will enhance their market position. This has been difficult for tier-1 suppliers as they integrate, moving into design and fulfillment, but not wishing to take risk on committing to outcomes which are less clearly defined in a closer working partnership. Doing so typically involves more risk and reward sharing.
VO: What is the last book you read and why did you choose to read this particular book?
Janssen: ‘Book of Ephesians’. Even though this was written long ago, this is still very relevant in a world in which there are many pressures. It reflects on the importance of being prepared; equipped, and persistent to achieve the goal.
VO: Thank you, Christopher.
Janssen: You’re welcome. Thank you.
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