Solectron: from Contract Manufacturer to Global Supply Chain Integrator

Solectron: From Contract Manufacturer to Global Supply Chain Integrator

1. How has Solectron’s value to its customers evolved over time?

Solectron started in 1977 as a small assembly job shop with annual revenue of several hundred thousand dollars and grew to become the world's largest contract manufacturing company with annual revenue of over $11 billion in FY 2004. During the early to mid-1980s, Solectron found a willing market for its manufacturing services. Roy Kusumoto and Winston Chen, the founders, both had ties to IBM so the majority of work initially came from ‘Big Blue’. Based on this experience serving IBM, Solectron was able to slowly diversify and get manufacturing contracts with several other major original equipment manufacturers (OEMs) in the electronics industry.

Many OEMs learned that they could benefit significantly by hiring outside manufacturers, like Solectron, to handle specialty manufacturing activities. As electronics markets became increasingly competitive during the 1980s, the OEMs were faced with constantly shrinking product life cycles, which meant that they had to reduce the amount of time they took to bring a new product from the concept stage to market. Specialists like Solectron were able to drastically reduce that time span. In addition to "reduced time to market," another benefit that Solectron offered to its customers was a reduction in capital investments. Instead of having to invest large sums of money necessary to develop production facilities for a particular type of circuit board, a company could pay a much smaller fee to have Solectron build the board. The OEM could then invest their time and money in other activities. Solectron's technological advantage allowed it to produce circuit boards and other electronic assemblies at a much lower cost and at a much higher level of quality than the OEMs could achieve given their limited resources and technological know-how.

In the mid-1980s, Solectron focused...