Michael Kottke: Growing With Greenfield Sites

Nolan Johnson: Michael, as a growing EMS provider, what’s most on your mind these days? 

Michael Kottke: If you look at our agenda, and ask about what markets we are supporting, you’ll see we’re doing a lot of stuff in space, as well as high-end networking, and high-end computing. We’re seeing a lot of security-driven devices. Who knew that China could be a security risk? I’ve been shocked at how often I’m approached about building product in the U.S.—product that they used to build in China or Taiwan. We’re seeing the more complicated, more traceability- and more process-driven stuff, so that’s what we’re going after. With all that, I think we’ll have another good growth year. 

Johnson: A while ago, you mentioned that there was a regional rather than global geographic effect as well. 

Kottke: I’m surprised at how many people want to do business in [Rocket EMS’s] Carson City [Nevada facility] as a cost-savings measure.?The cost savings from here in San Jose to Carson is significant;?the building is one-fifth the cost, power is 30–35% cheaper, and as you go down the list, you’ll find that almost everything is cheaper on the overhead side. 

The labor is a little bit cheaper, but because of the way that Carson City will be structured, we’ll have most of the expensive overhead here in San Jose. Carson City will be more of a production facility that relies heavily on automation as well as reduced overhead to achieve a very attractive cost model for our customers. I’m shocked at how many people are interested in moving business from here in California to Nevada. 

Johnson:?You’re talking about having more complex work coming into your facility. Is that something that you are actively pursuing with sales and marketing? 

Kottke: I actually don’t have a marketing team or a sales team. Currently, we get about one new customer request a week, and we’re probably only taking on one or two a month. If we wanted, we could get 10 new customers a month, but we want to be careful about where we’re putting our resources for customers. A lot of prospective customers want engineering support alongside program management support; some customers have a difficult time paying for all that extra work. We have great resources that enable us to take on those high-maintenance customers, the kind of people who don’t have good systems or tools and need that kind of hand-holding—those are great customers, provided they have the budget to pay for those additional services. 

Johnson: Am I correct in presuming that part of your ability to move into these higher complexities is because of the business operations software that you’ve developed at Rocket EMS over the years? 

Kottke: Yeah, we are continuing to make significant investments in automation and systems. The Voyager software team has tripled in size over the last two years and the resulting capabilities and data collection power probably close 90% of the customers when we have a customer come through for a tour. If they get the Voyager demo, it’s a “close the deal” kind of scenario. Every three months or so there are major revision changes to it, and at least once a month we have a list of updates and improvements. The Voyager software has gotten so good. Now that we have the engineering guys, production, and the quality group working closely with the Voyager team, we’re generating very specific reports and tools. That move has improved efficiency by a crazy amount; it’s mind boggling. 

Johnson: Add that to the other efficiencies in operation in Carson, Nevada, and your operations really start to change. 

Kottke: In 2023, we will be investing in systems and automation capital equipment. If everything goes correctly, that building will have two to three times the capacity of Santa Clara and probably 50 to 60% of the personnel.?That changes my cost model; it changes what business I go after; it changes everything.

This is an excerpt from the February 2023 issue of SMT007 Magazine, click to continue reading this conversation.