Suppliers have to provide total solutions, not just products

Successful companies today are increasingly concentrating on their core competencies and outsourcing their non-core activities to suppliers, says McNeill.

Design News: It appears that in the automotive and high-tech sectors, design expertise is moving from the original equipment manufacturers (OEMs) to contract equipment manufacturers (CEMs). Why is that?

McNeill: The reason is that companies are focusing on what they do best. No company can do everything itself. Companies in the electronics industry-such as Cisco, Compaq, and Hewlett-Packard-that used to do their own manufacturing are now focusing on design, marketing, and final assembly. Now, many companies are even outsourcing final assembly, and contract equipment manufacturers are putting together models for cost-efficient manufacturing. Flextronics is one such contract manufacturer. In six years, it has gone from being a company fighting for survival to its present position as a $12 billion global powerhouse. It achieved this growth through acquisitions, and by partnering with key customers, including taking over manufacturing and assembly operations.

Q: Well, in this new paradigm, what new skills do engineers need to succeed?

A: They have to get out of their office more and tune into the voice of the customer. Segments of their design chain are now located all over the world. We are training our own engineers to be tuned into the needs of our target customers. We want to be a virtual engineering center for our target OEMs and CEMs for their engineered-access solutions. Our OEMs make servers, routers, cars, boats, and construction equipment, among other things. They don't design and make latches. People don't go to Cisco or HP for mechanical engineering design. Southco's passion is to rapidly respond to our customers' needs, to be connected through the Web to their design teams, and to help them with rapid prototyping.

Q: What new skills do engineers need to work effectively with CEMs?

A: Engineers have to learn practical things like design for manufacturability. They have to design products that allow CEMs to be competitive as they build their own products.

Q: How have you changed your internal processes to accomplish this new customer focus?

A: We have realigned our organization by creating three business units: Network/Telecommunications/ Computers, Automotive, and Diversified Markets. Each is led by a general manager with the resources to create and seize business opportunities. We emphasize a connection to customers, and all our engineers get "voice-of-the-customer" training. It's great to watch engineers learn communication skills. And, we've found that bringing customers into our pro-cess energizes the product. Another change we've made is that we don't limit the front end of our business units to designing in only Southco products. We'll even find ways to supply an alliance product if it's the right solution for the customer. In fact, several other component suppliers have asked us to be their front end. Also, we have created several "extranet" web sites to give key customers access to CAD files and other product information specific to that customer, so they can get to solutions faster.

Q: Is this trend of outsourcing design expertise true globally?

A: Yes, it is. That's why we have opened offices in Hong Kong and other foreign venues. We have to be able to serve customers all over the world.