Submitted by- Harsh Pandit, Aditya Agrawal

Student ID- 20152009, 20152057

Solectron Case Write-Up

In 1977, Solectron was founded in the wake of the solar energy boom and focused mainly on the
production of solar energy products. Soon they started assembling printed circuit boards for other
electronic companies. Solectron was located near Silicon Valley and its electronics industry, so
numerous customers were readily available for its production services.

In the early 1980s, Solectron focused its efforts on contract manufacturing, which made the labor
industry an important sector. Solectron started to purchase its customer’s production facilities,
which allowed them to sign long-term supply contracts with them, as well as to increase the supply
to other customers. At the end of the 1990s, Solectron had three strategic business units:
technology solutions, global production and global services. Solectron has focused its activity on
customer service and respect for the individual.

It was through constant evaluation and continuous improvement that Solectron was able to win the
Malcolm Baldrige National Quality Award twice in a row, which was a new record. Solectron has
continued to drive innovation in technological developments, which has continued to increase its
advantage over its competitors. In 2000, a weakened economy caused demand for Solectron
services to decline and, once, Solectron's inventory increased to an excess of $ 1 billion. After
restructuring for a slower economy, Solectron was optimistic about its future in developing markets.

Value Solectron provided to its customers

 Cost: Solectron has used its strategy to become the main source of outsourcing for
companies as a strategic advantage. Its volume has increased considerably due to the
growing number of customers and companies. This allowed them to offer reduced prices
due to the greater volume of purchases and large-scale production economies.
 Quality: Since the quality of production can be limited to certain physical and specific
customer characteristics, Solectron has moved towards a more service-oriented partner,
maintaining the superiority of the product. Although attention to product quality is essential
for maintaining customer relationships, service quality is an important source of
differentiation in a sector that already provides for large production capacities.
 Flexibility: With increasing customer production requirements and a wide range of desirable
markets, flexibility must be a key consideration when competing in the EMS industry.
Continuously evolving with market conditions, Solectron has acquired numerous facilities to
meet the needs of both consumers and customers. By essentially becoming a global supply
chain integrator, Solectron can utilize every production facility at an optimal level, source of
the regions where most of the value is acquired and capitalize on market delivery times from
proximity to target markets.
 Services: Based on an excellent customer service base, Solectron has been developed to
cover an essential range of services to offer to its customers. This cornucopia of services has
been divided into three different business units, one each. As stated by Diana Farrell in
Beyond Offshoring, the outsourcing of IT / business processes in a global view has only an
annual value of 1% of world trade at the annual value of the sector's sales report, which
indicates significant potential for improvement and the capitalization of future revenues. By
Submitted by- Harsh Pandit, Aditya Agrawal
Student ID- 20152009, 20152057

offering these services mainly in the EMS sector that focuses primarily on production,
Solectron can differentiate itself from the competition by offering excellent competition in
the service. Given this service factor together with the excellent quality of the product,
Solectron is very difficult to overcome in this sector.

The technological solutions unit provided a design of modular and integrated systems and
production systems that customers could use to improve their operational efficiency. The global
production unit has enabled Solectron to manage the production needs of its customers. While
contract production was their main source of income, it also offered new product introduction
services and prefabrication capabilities to further offer their experience in terms of production
efficiency and excellent supply.

The global services unit was essentially Solectron's formal commercial customer service unit. This
unit offered product repair, upgrade and maintenance services through production facilities and
service centres. In addition to product-oriented services, this unit also offers services related to
storage, logistics, return management, technical change management and end-of-life management.
Global materials services have integrated each of the three business units with operational skills
such as interactions with suppliers, acquisitions, stock optimization, preparation of market forecasts
and provision of global logistics support.

The company has successfully integrated its acquisitions focusing on two important aspects,
employees and culture. Solectron's success depended on Solectron's ability to employ the
intelligence and experience of new employees. There was an integration team with members who
represented the functional areas to plan a trade integration process even before the acquisitions
were finalized. In the end, an even more detailed plan was created, which helped train new
employees to act as a Solectron resource.

Solectron was performing very well in the markets and its stock was in advancing at NYSE, till there
was an economic shock in 2001. This economic downturn faced by Solectron was mainly due to 3
factors;

1. Economy meltdown- there was demand sock experienced by the firm from important customers
most likely from telecommunication sector.

2. Wrong forecast- Companies demand forecast was far beyond form normal profit generating
scenario. This was due to wrong expectations from customers such as HP, Cisco, Ericsson etc.
expected heavy demand from the telecommunication sector.

3. Increase in inventory levels- Due to rapid change in business environment, there were huge
obsolete inventory stocks.

All this led company’s stock to decline drastically and Solectron was in the position of seeking help
for retaining their operations. Company went for very harsh business decisions such as downsizing
and facility closure. Company restructured the organisation by developing new goals and plans and
continuously monitoring different cost structures.

The portion of restructuring forced company to close acquired plants in hungry and Mexico, as they
shifted their production to other plants. Despite the economic slowdown, and painful restructuring
of the organisation, Solectron remained optimistic in long term. To overcome the situation, the
company also focused on untouched markets of Asian region excluding japan, they also forecasted
Submitted by- Harsh Pandit, Aditya Agrawal
Student ID- 20152009, 20152057

demand from central and eastern Europe as these regions had higher disposable income to spend
upon technological advancement. However, company was worried about accurately positioning
themselves for the future.

Solectron: From Contract Manufacturer to Global Supply Chain Integrator. (n.d.). Retrieved from
https://www.gsb.stanford.edu/faculty-research/case-studies/solectron-contract-manufacturer-
global-supply-chain-integrator.