The PC Systems Blog

Here is some connector news that has been flying under the radar, but may have significant implications with regards to harsh environment connectors in the future.  TE Connectivity has acquired Deutsch from Wendel.  I am not a financial analyst by any means, but I expect the uncertainty in the European markets made this an attractive acquisition.  It is important to note here that the acquisition includes Ladd, which is the single source distribution partner for Deutsch.

http://investors.tycoelectronics.com/phoenix.zhtml?c=209396&p=irol-newsArticle&ID=1634437&highlight=

http://www.ft.com/cms/s/0/2105afbc-1b4c-11e1-8b11-00144feabdc0.html#axzz1fl52pmdV

If you are unfamiliar with Deutsch, they hold a large marketshare when it comes to connection systems on heavy equipment, from construction (backhoes, dozers, graders, etc.) to more industrial (man lifts, telehandlers, truck bodies, etc.).  TE Connectivity has had some success breaking into that market with their AmpSeal line, but Deutsch is still the king.

This will be interesting to see how this all plays out.

• What will happen with Amphenol and their recent introduction of the Amphenol Sine AT Series (which is a direct replacement to Deutsch DT Series)?
• Will there still only be one place to purchase Deutsch components?
• Will TE Connectivity use their leverage to increase pricing, or will they use their breadth to reduce pricing?
• Will there be consolidation and how will that affect Quality and Reliability?

All questions that you can be sure we are asking of our contacts within the industry.

By the way, has TE Connectivity gained a firm footing in anyone’s lexicon yet?  It still feels awkward to say it, and every time I typed it in this post, I typed Tyco, backspace, backspace, backspace, backspace, TE Connectivity…

I don’t expect this is news to anyone, but the ongoing sentiment is that the automotive supply base is fragile right now, and will struggle to ramp back up to capacity.

Here is an article on Autoblog covering this:

http://www.autoblog.com/2010/12/23/report-many-suppliers-downsized-for-crisis-and-now-too-small-to/

The most telling quote for me:

“…many suppliers are reluctant to move beyond overtime and hire on new employees until the economy shows more signs of recovery.”

Here at PC Systems we have been hiring, but we have also been trying to accommodate fluctuations in demand with overtime hours.  It seems that both our suppliers and customers are trying to find solid ground and demand forecasting is a real challenge. 

We feel we have positioned ourselves well for success in the future.  We are hoping that our careful planning and strategy will provide more opportunities for us as customers find their other suppliers struggling to increase capacity. 

If you think you can take advantage of our excess capacity, we encourage you to give us a call. 

If you work in the electronics industry, you are most likely aware of the tragedies at the Foxconn facility in China that occured recently.

http://www.nytimes.com/2010/06/07/business/global/07suicide.html?scp=6&sq=foxconn&st=Search

I have been mulling this topic over for the past couple days and wondering the best way to address it in the blog. If you Google the subject I am sure you could find a couple hundred blog posts on the subject all with different viewpoints. I would like to approach it from an Engineering perspective, a PC Systems perspective, then also a personal spin at the end.

First, as Engineers, we must always be cognizant of cost. Design is critical, but if you can’t provide a product cost that will win the bid, your effort is wasted. This often leads us to offshore pricing for simple products to take advantage of the low labor costs.

We will save the topic of actual cost of offshoring which takes cost of quality, support, freight etc. vs. unit price for another day.

Often times are hands are forced into populating our designs with an offshored component. If we don’t do it, our competitor will, and we will likely lose the bid. A tremendous amount of time can be wasted this way. I am not quite sure what the solution is, but we definitely have a problem. Every Engineer who has sat through an ethics class has to be reeling from the news at the Foxconn facility. Also, we must also recognize that we can’t claim ignorance to the topic, as we were all well aware of the terrible labor conditions in the low cost regions such as China, India, and Eastern Europe. I am not sure of the solution, but it is a problem that weighs very heavily on me.

From a PC Systems perspective, we discuss and debate offshore sourcing on a daily basis. This discussion usually is focused on pricing, leadtime and quality. Many people will associate poor quality with products from China, but we do not find that true with many products, assuming you do due diligence in selecting and qualifying a supplier.

As a company, with regards to our more mature product lines, we are typically very competitive on cost. We reside in a very low base cost region where cost of living does not dictate a high wage for anyone from the janitor to the CEO. Also, we watch our labor costs very closely so that we may compete with offshore competitors, particularly on larger/heavier items that are expensive to ship. There are many reports that the recent salary hikes at Foxconn will have a ripple effect across the industry. Ultimately, workers will demand an improved quality of life, with consequences yet to be seen. Here is a link regarding the effect in Taiwan:

http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?ID=201006170013&Type=aOPN

The effect of this will likely be an increasing cost for all product because of transferred cost to the customer and also salary hikes at other companies to retain a competitive wage. I personally feel this will help PC Systems in the long run, because of our low content of offshore components and also it will allow us to be more competitive due to our already lower base cost. This is yet to be seen as well.

Finally, from a personal perspective, we really must ask ourselves “Is it really worth it?” when we are looking at purchasing new products. This is most important from a personal perspective because I feel the only way to improve the conditions in LCRs is to stop demanding the lowest price possible on goods, particularly on electronic components such as cell phones, laptops, etc. I am a strong proponent of free markets, and often stand in stores such as Wal-Mart and pick the product that saves me $0.05, blindly assuming that the suppliers are being ethical and the variability in price is due to accepting of a lower profit. They have said ignorance is bliss, and I feel this isn’t a decision I will be able to make as easily from now on. Supply will always follow demand. If we demand the lowest possible price, there will be suppliers who find the cheaper ways to manufacture product without regards to the effect on society.

In the end, we have to ask ourselves, is it really worth saving a nickel if it means abhorrent labor conditions for the workers producing the part? I know there isn’t a simple answer, but it should be a question we are all considering.

Understanding this is a very touchy subject, I would like to know your thoughts. Have the recent events changed the way you are buying products? What do you think the effects of the salary hikes will be on your business?

“A digital native is a person whom digital technologies already existed when they were born…” per Wikipedia.

Yesterday, three representatives from PC Systems, Inc. attended an Innovation Roadmapping Workshop facilitated by Dr. Irene Petrick. She described digital natives as anyone born after 1980. You may ask, ‘”What does a generation of people have to do with engineering or electrical interconnects?”, which is the same question we asked.

In the spirit of full disclosure, I personally am a “digital native”.

In the next five years, individuals such as myself will begin to take larger roles in organizations. We, the digital natives, will become the decision makers. This means that the manner in which product is designed and purchased will likely see a dynamic change.

We, the digital natives, use technology in very different ways than the past generation. A couple examples:
1) I prefer email over using the phone for communication. This is a major point of contention between our Product Manager and myself. My reasoning is that I am always multi-tasking. Anyone who multi-tasks knows that it is impossible. The brain can only focus on one thing at once, therefore multi-tasking is really just jumping from job to job to job very quickly. The consequence of this is I often forget what is communicated over the telephone three months after the fact. A written log of a conversation to me is more efficient because the intent is to not rehash the same conversation over again every time the topic comes up. Did I mention that digital natives think the world revolves around them?
2) Simply stated, ask a digital native to send a fax. If they are like me they will look at you dumbfounded. Why send a fax when you can scan the document, email it, and then have electronic copy and documented history? After going through this scenario with our Purchasing Manager I now understand some people are actually more comfortable receiving a fax, but I still don’t understand why. I probably never will. Did I mention that digital natives think the world revolves around them?

There are countless examples of how digital natives are different that past generations. I am sure you can think of a couple yourself and I would love to read your examples.

How will PC Systems change its business to accommodate these new buyers and engineers? We have already started, hence the creation of this blog. In the future, we will become as transparent as possible. One step we have taken to do that is to launch a new ERP which is a significant investment for a company of our size. We feel it will allow us to provide a higher level of customer service because of the increased business intelligence we can pull from it. Also, our website will become more interactive.

The next question is, how do you accommodate the new digital natives while not alienating the older generation of buyers and engineers. I feel this will become a balancing act that we will monitor very closely.

I don’t want anyone to think that our workshop focused only on digital natives. The day was full of interesting and useful information that will make our company better. The digital native “bit” was only about 10% of the entire workshop, but I thought it would be a good introduction to a blog.

Thanks for reading! If there are digital natives out there, I apologize for any bruised feelings. The above statements are obviously stereotypes, but in most cases, I would expect them not to be far from the truth (myself included).