The Newest Flex Shop in the U.S.

Estimated reading time: 27 minutes

Lencioni:

Matties: Part of the reason I ask is because you are talking about substantial growth here. You're looking at headroom to almost double what you're doing. Where does all that come from?

Lencioni: New technologies. If you look at our customer base they're constantly evolving. We did get an uptick from the TTM/ViaSystems merger, so they walked away and can't support certain levels of business, and we started seeing some of that. There's been a couple of other facilities that have gone out of business, and we were in the right place at the right time and that helped us out. They find us in different ways. Sometimes it’s attrition, sometimes it’s the nature of the beast. We have not advertised this company yet.

Our growth has really been organic, word-of-mouth and customers we have done business with, and now we are looking at the next level. That's one of the reasons we are looking at expanding our marketing efforts.

Matties: You certainly have a strong story here, and it needs to be shared.

Lencioni: It's been really exciting to see it grow to where it is; our foundation is so sturdy and stable and ready to go that it's exciting to see a path.

Matties: It looks like you’ve built a great foundation, brought great tools in, and I see a lot of training going on, on the shop floor. Is cross training something that is being done by design here?

Lencioni: Yes, I'll have to show you some of our HR concepts; it is a results-producing management style, so everyone is rated from a one, as a beginner, to a five, as a master. Every single cell has every single process in there and every single person is ranked based on their skillsets. We look at our gap analysis to see into a work cell. If somebody calls in sick or is not available, we are able to see who we have for coverage on every shift of every cell. We have to make sure we have personnel resources that are rated at least a three or a four. This demonstrates a level of competency that we require in those areas in order to run those tools and produce those parts.

It's constant, every day, looking, evaluating, and making sure we have proper staff who are trained.

Matties: It looks like redundancy is something that is strong here. Like the power generators on the roof to keep all your servers running and so on.

Lencioni: When we look at our capital budgets every year, the biggest thing we look at is where our Achilles heels may be, and we try to adjust to those first. If we lose a certain technology for either maintenance or unpredictable downtime it is very hectic. It gets me really excited because it has to get up and running. We try to get as many operations with dual sets of equipment as we can to make sure we continually produce for our customers.

Matties: I think I saw you currently have one direct imaging unit here?

Lencioni: We have one LDI from Orbotech, and we are looking at purchasing our second one, maybe by the third quarter this year.

Matties: Is your goal to be completely digital?

Lencioni: Yes, a 100% digital environment and no off-contact printing or films produced. We're about 95% there right now.

Matties: That last 5% is the tough part though, isn’t it?

Lencioni: Yes, we do some soldermask imaging and that kind of stuff, but we're pretty close. The imager right now is at about 70% utilization of that tool, and as it gets closer to 80% and 90% that’s when we’ll start bringing that second tool on board.

Orbotech has been great. They have really good support systems, they're machines are pretty reliable, they have techs in the area, and everybody has their machines so parts are pretty available. I can't say that for all of our suppliers, but Orbotech does a pretty good job.

Matties: You're right here in Silicon Valley, so you must have a lot of supply choices.

Lencioni: Our primary vendor for materials is Insulectro; they are our largest supplier. They're great as far as storing materials, inventorying them, getting them to us just in time, and producing on the floor.

Matties: What about process improvement? I know you have a lot of data, but what are you doing to drive to higher technology?

Lencioni: The first thing we do is have several process engineers monitor the process. We're looking at data coming out of AOI inspection, and we're looking at where the defect was created. Whether it be surface prep, etching, or imaging, we’ll look and track that defect down, and process engineering is responsible to move that process up. Whether it be training more people or equipment upgrades, whatever it takes to get that feature size defined more consistently.

Matties: Do you set a roadmap in terms of the type of equipment and where you're headed?

Lencioni: Yes, we have a process of evaluating our customer base. We look at where their designs are going and we try to prescribe equipment that's going to suit us to handle that demand. For example, we are in the middle of qualifying a pressing system, because we are now looking at materials coming down the pipe that require much higher temperatures than the typical lamination cycles. Now we are forced to look at equipment sets that can handle high-temperature lamination cycles, and that will be our next challenge.

Matties: What sort of budget do you set for that? Is it a percentage of sale for capital reinvestment?

Lencioni: Typically we would look at the profits for the previous year, we look at shareholder return, and we look at what's available after that for capital equipment purchases. Most of our stuff is purchased through our bank, with whom we have a great relationship. They have helped us grow through the years. We're able to stretch those notes out to four-, five-, and six-year terms. We look at what our debt service is and we make sure our profits can service that debt and keep all the covenants in check.

Matties: You don't exist for 30 years by being irresponsible.

Lencioni: No, you have to really manage it. We've gone through three recessions. The first one was very devastating, when the dot-com busted and all that kind of stuff. The last two didn't even faze us. We positioned ourselves well in the marketplaces that were stable.

Matties: Was R&D still thriving, even in the recessions?

Lencioni: We didn't overspend. We're not on the cutting edge. We wait for technology to develop, purchase the equipment right behind it, and then provide our customers with a solid, well developed and supported technology.

Matties: What's the greatest challenge in running a flex shop?

Lencioni: Like any other company, as soon as you get past 100 employees, I always tell everybody it's the people. It's getting new people in as you grow, getting them trained in the Lenthor culture, and then getting that digested quickly so that they can be productive.

Matties: Automation plays a role in this, though, doesn't it? You're growing with people, but you're also looking at technology smartly, aren't you?

Lencioni: We've yet to see a technology that automates flex circuits. If you're in a roll-to-roll process, sure, but you'd be producing single- and double-sided circuits in huge volumes to support that capital equipment. We are still looking for companies to be ingenuitive in how they propose automation upgrades for the handling of the thin dielectrics we use everyday in manufacturing. In a rigid board business, it's easy to have automation machines that suck it up with a suction cup and move it to the next work cell. Flex circuits? Forget about it. It’s unfortunate, but we are still in a very manual, hands-on manufacturing environment. We don't see it getting away from that until somebody invents a new mousetrap.

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