A Fresh Look at Outsourcing Solutions in Electrical Testing

Estimated reading time: 11 minutes

Valentini: In most instances that is the case; we are inside. But it doesn’t necessarily have to be that way. There are regions where there are so many customers in the area and the service centre is big enough, that there is an economy-of-scale effect for the customer to say, “I don’t have the space but I still have the need,” and we are doing it in one central facility rather than several smaller facilities. That typically gives the customer a faster turnaround, and we can invest in equipment that the customer himself perhaps would only need 20% of the time, and some other guy needs it 20% of the time. So instead of a customer having to carry 100% of the investment load for a 20% need, it’s basically shared among several users.

Starkey: But if you are operating inside the customer’s plant, he knows that he is getting your exclusive attention. If you have a service centre amongst a cluster of customers, how can you give a customer the assurance that his work will receive the same level of priority, and not be in the situation of going to the dry-cleaner and being number 20 in line?

Valentini: This all comes down to management, and to handle this we have developed an internal ERP system that we link to the customer. One of the things we are doing that is different than the dry-cleaner, is looking ahead at what’s coming our way. We have a very good idea what’s on the shop floor—even an idea of what is already running late.

Starkey: And it’s in the customer’s interests to be completely open with you.

Valentini: Yes, because we have the same interests as the customer. It’s less a customer-vendor relationship and more a partnership. We try to help them with the situation, and this is reflected in the payment model. Let’s say if the customer has the benefit of a quick-turn job, we may be participating in some of those benefits, with our people understanding his position, where he says, “Yes, I know it’s my fault, maybe I’m late in production. But it needs to be done anyway.” And just as if it was internally, he tells us his priorities and our people would execute the priorities just like an internal department. On the other hand, it still gives the customer a third-party view of his product. We all know how difficult it is when you are under production pressure to stop and say, “You know what—that product I can’t pass!” We have no choice, because it’s our obligation in the contract to clearly state whether it works or not, whether there is a problem or not. And it could be as simple as the customer gives us 20 ohms as a pass specification but the resistance of the trace as designed is already 25 ohms. We have to go back and tell him that we need to go back to the designer and get him to change the specification, because otherwise it couldn’t possibly pass.

Starkey: But again, you have the opportunity for that feedback all the way back along the supply chain, rather than just be at the end of the chain as a go/no-go filter.

Valentini: Of course, the idea is not actually just sorting the good and the bad. The idea really is to feed it back to the customer to give him a chance to improve his process.

Starkey: You want that customer to make all good product, rather than saying “This is good and this is bad.” You want to get right back to the early stages of the process so that it can be brought under control to ensure that all that you will be doing at the end of the line is confirming that the product is good

Valentini: Yes. For this we had to develop what we call a partnership pricing model which is quite unique to Gardien. We are really looking at the cost of running the department and we are basing our pricing on the throughput of the factory. Guess what—you’re making bad product and you must re-do it. So we have to re-do it as well, and because you’re not getting paid for it, we’re not getting paid for it. If you have to make 120 boards to deliver 100, it costs us more work since we only get paid for product that actually passes our inspection. So automatically it is in our own interest to turn back to you and say, “You know what; this particular problem, you can fix it and maybe you can now make 110 boards instead of 120, and can ship 100.” It also builds in the constant price pressure we have in the industry.

Regular products are always under price pressure, because we are getting paid for what you are getting paid for. That means we must constantly look for opportunities for efficiencies and to work with the customer: “Is there a better way of doing this, a way to improve this?” because we are under a certain commercial stress. It’s not like a department that says, “It’s not really my problem.” Our guys have to justify to us what they do and how they do it, and we obviously need to justify it to the customer. That makes an engaging conversation. Where do you want to go? What’s your plan for next year and for the following year? We really try to sit in the same boat, but at the end of the day it’s a little bit like a marriage! Sometimes it’s rocky, sometimes it works well. We understand that in the relationship the needs and desires may be changing, but overall we are working on being a happy couple.

Starkey: Roland, I admire the frankness with which you’ve explained your strategy. I really like the dry-cleaner analogy—that puts it into a context that is clearly recognisable.

Valentini: The whole idea of the Integrate—bringing somebody inside and being transparent to that company—obviously requires the other side to see the benefits to them, so you try to explain it in a simple way. Contracts are complicated enough!

Starkey: Roland, you’ve given us a very clear explanation, and it’s a very smart business model. Thanks very much indeed for taking the time to talk with us.

Valentini: Thank you Pete, it’s been a pleasure.

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