So how do you manage to achieve 20 percent compound growth over the last two years while opening and staffing a new state-of-the-art manufacturing plant when everyone else in your industry is suffering declining business?
Work closely with your customers and your suppliers. Communicate frequently. Develop your people and procedures to quickly and effectively respond to customer needs with the highest quality and innovation. That’s the moral of this “epic” story. EPIC Technologies in Norwalk, Ohio is a specialty manufacturer of complex printed circuit board assemblies for the high mix, low- to medium-volume segment of the Electronic Manufacturing Services (EMS) industry in the Midwest region. It is a subsidiary of TMW Enterprises, a private equity fund focused primarily on the automotive industry. About three years ago, TMW assembled a group tasked with applying the lean manufacturing principles and latest engineering disciplines to re-design the traditional approach to manufacturing electronic assemblies.
“The way it used to work was that the OEMs placed orders for a fixed window of four to eight weeks in which finished goods were produced,” explains John Sammut, President and CEO of EPIC. “The problem with this is that if it turns out demand forecasts were overly optimistic, or if there’s some new change in technology, which happens frequently in this industry, customers are stuck with product they don’t need anymore.” Conversely, EPIC is accustomed to two to three day order windows based on pull signal releases from their customers, which allows EPIC customers to enjoy extremely high inventory turns (often over 60 times). The EPIC solution is a combination of up-front customer involvement, process improvement, new technology, systems integration and strong supplier relationships.
“Our Business is an Extension of Our Customers’ Business”
“The trend in this industry is to outsource manufacturing,” Sammut points out. “It’s more cost-effective for us to have the latest equipment because we have multiple customers, so that equipment is never idle; that also gives us greater purchasing power with our suppliers because we order in larger quantities. It’s just too expensive and resource-consuming for these companies to operate in-house. But we’re more than just a contracted service, we actively partner with our customers. That’s one reason why we are so successful.”
“Our market niche is the medical, industrial, and automotive segments of EMS,” explains EPIC’s Director of Business Development Todd Baggett. “Generally, the printed circuit board (PCB) assemblies in these segments require greater manufacturing expertise and have shorter runs and delivery cycles than the high-volume standardized PCBs used in the computer, telecommunications and consumer products industries which can rely on low-cost, off-shore mass production. Our customers require assistance with product design and prototyping. That’s our value-add. We’re not just contract manufacturers; we view our business as an intertwined extension of our customers’ business. EPIC participates in the customer’s engineering process for circuit development, component selection, packaging, validation and product testing. Because of the knowledge we gain during pre-production, we’re able to more effectively gear our manufacturing process to maximize functionality, reliability and cost effectiveness.”
Demanding requirements built to demand
Key to manufacturing efficiency – and therefore greater profit margins – is the implementation of Synchronous Flow Manufacturing processes which enable just-in-time ordering and inventory as well as on-the-floor customization. “Because we can make immediate software changes to products, and because we build to meet current demand, not projected forecasts, customers don’t risk getting stuck with product that either has to be reworked or scrapped,” explains Vice President of Operations Jochen Lipp. “As a direct result, we’ve cut the industry norm for obsolescence by two thirds,” adds Lipp, who is informally referred to within EPIC as the “Manufacturing Meister.”
Indeed, EPIC management attributes much of their success, particularly in their recently opened plant in Juarez, Mexico to Lipp ’s leadership and manufacturing expertise developed in various positions in Germany and Hungary, as well as Mexico, for Alcoa Fujikura Ltd. “To give you an idea of how well regarded Jochen is, we had over one thousand applicants to help staff 200 positions in the Juarez plant,” Sammut points out.
South of the Border, the EPIC Way
Juarez offers the advantage of a low cost labor pool coupled with proximity to EPIC’s El Paso distribution center to ensure the local control required for a regional operation with close customer relationships. However, foreign operations present several challenges that EPIC anticipated with several proactive steps. “Typically, foreign facilities suffer from high turnover and quality concerns,” notes Lipp. “To avoid these pitfalls, we developed several extensive assistance programs for our employees.
These include busing people to and from work, in-house medical services, meal programs, and employee certification programs to develop skills and earn higher wages. The result is a 2 to 3 percent annual employee turnover rate where the industry average is in double digits per month. It’s also typical for these facilities to try to get by with older equipment. We, on the other hand, invested in the latest technical platforms that meet the highest manufacturing standards.” As an example, EPIC has recently invested in state-of-the-art EPM wave soldering and vapor-phase reflow ovens, the first installations in North America.
Complete Systems Integration
As a subsidiary of TMW, EPIC has sister divisions in Millenium Plastics and the Pullman Industries, with access to their respective manufacturing capacities for injection plastic molding and metals. “This enables us to offer customers not only a completely integrated product which involves plastic or special metals manufacturing, but one that achieves economies of production and cost,” Lipp points out.
Getting Suppliers On Board
The final element in the mix is suppliers. Just-in-time manufacturing depends on co-operative supplier relationships that effectively integrate with these processes. “The secret is for the supplier to understand that they don’t sell product until we do,” explains Sammut. “Essentially, the supplier is a part of our team, just as we are a part of the customer’s team. To this end, communication is the key to forging effective supplier relationships. We hold monthly meetings with our suppliers to review ‘report cards’ on how well we’re working together. And every six months we review our business wins to demonstrate to them how well our model is working.”
The Future Charge
EPIC is doing quite well for itself during an economic downturn. While it continues to work on refining its tools and procedures to achieve even further flexibility and efficiency, it is considering expanding to other regions and perhaps partnering with distressed OEMs. While it’s an EPIC tale still to be told, you can expect any future sequels to maintain the same high-concept formula that makes for a best-seller.