Business Workshop Report 4 
- IBM

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BUSINESS WORKSHOP REPORT

COMPUTER PRODUCTS

British Plastics Federation

 

THE BUSINESS WORKSHOPS

The Business Workshops are supported by the DTI as part of the Partnership in Plastics (PIP) Programme. The Programme is designed to improve the competitiveness of the UK plastics processing industry by building links between major customers and small to medium enterprises (SMEs). The focus of the Business Workshops is on informing the SMEs of the changing needs of major customers and the means of meeting these needs.

A WORLD-WIDE SUPPLY AND DELIVERY MARKET

IBM is one of the best known multi-national brands in the world and the extensive product range covers all aspects of computing technology. The UK personal computer (PC) manufacturing facility, located at Greenock in Scotland, produces approximately 2 million PCs per year (both desktop and portable ThinkPad models) for the European, Middle East and African markets. Additional manufacturing facilities are located at Raleigh in the USA and Guadalajara in Mexico to service other markets.

Typical plastic parts for PC's are front panels for desktop models and complete clamshell cases for portable models.

WORLD-WIDE PROCUREMENT

To enable localised production of a common product range IBM has created a world-wide procurement organisation. Specific procurement groups (e.g. the "mechanicals group" for plastics products) monitor the buying, contract execution and factory usage for the total manufacturing organisation. In many ways, the computer market has become a "commodity market" except at the very forefront of the development cycle and most of the products purchased are regarded as commodity products.

SUPPLIER REQUIREMENTS

Global customers need global suppliers and for many suppliers, the critical area is the logistics of supply rather than the more traditional concerns of price or technical capability.

The essential requirements are:

  • A global presence to give local support at all manufacturing locations - Suppliers must develop solutions for any product concerns at any manufacturing location.
  • Suppliers should generally have multiple manufacturing sites to provide workload balancing and capacity redundancy - The range of delivery points requires an effective geographically spread logistics network.
  • Local replenishment capacity to cope with JIT deliveries - IBM carries stock for only 1 days production and the supplier must have 2 weeks stock on hand for rapid stock replenishment. Product is built to order and not to schedule and no orders means no pull on the supplier's stock. General global demand is forecast but the supplier must meet regional demand variations wherever they occur in the world.
  • An understanding of the total cost of acquisition - This is the total of the traditional materials, assembly and labour costs as well as the logistics costs and the costs of on-site support.
  • Close control of tooling timing and acquisition - The relationship between "time to market" and profit means that margins are only strong in the early stages and once uniqueness is gone the "box shifters" take over. The supplier can source the tooling "in-house" or from a partnership toolmaker but there is never any tooling amortisation and IBM always owns the tooling.
  • ISO 9001 is a minimum initial entry requirement - Just as important are the supplier's attitude and willingness to work as partner and the ability to reach the minimum product quality levels required. Acceptable defect levels are in the range of 2000 per million and computer-based systems are used to give access to all quality statistics for process quality.
  • Highly developed project management capabilities and skills - These are needed to deal with strong time dependency and a world-wide product development and supply chain.
  • Design capability - A supplier's design solution can range from 0 to 100% of a product design and strong design capabilities are needed to provide tested and reliable solutions.
  • e-business capability - As a leading provider of computer e-business solutions, IBM is naturally taking a leading role in driving the process forward. Suppliers must be e-business enabled and from 2000 no regular business will be carried out via conventional means. Suppliers will receive an electronic order, provide an electronic invoice and be paid by electronic funds transfer.

A key to working with multi-nationals such as IBM is the creation of strong long-term relationships. When suppliers provide good engineering support and local hubs no multi-national will change suppliers lightly and short-term gains are not a key objective.

GLOBAL SOURCING AND PARTNERSHIP

The world-wide demands require the development of structures to service the customer and new multi-national plastics processing groupings are developing to meet these demands. Typical structures are:

  • Independent and separate companies which operate with a specific global management structure to deal with IBM.
  • Loose alliances between companies with an independent management company to look after the logistics and project management - the things that manufacturers are bad at.
  • Hub and spoke operations with manufacturing at a central factory and distribution hubs at local manufacturing units.

In addition to the new logistics, IBM is reducing the number of key suppliers and encouraging the formation of strategic alliances and partnerships with "integrators". These are companies (or groups) who have access to a broad range of abilities and do more than deliver a single component - if a company is only delivering a plastic moulding then there is no future in the multi-national world. More vertical integration is coming and key suppliers will be world-wide groupings supplying full sub-assemblies on a world-wide JIT basis.

In addition to the logistics, the successful companies will have mould making capability, specialist moulding skills with specialist materials, will provide complete sub-assemblies with high functional and cosmetic properties and will have a strong ethical approach to supplying the customer. These companies will have a single communications chain to present a single contact point for the development of a robust customer-supplier relationship.

 

Producing the parts is simple - it is what moulders do.

The hard part is the logistics.

 The aim is to have any material in the factory for the shortest possible time. Suppliers must deliver sub-assemblies and not simply components.

EXAMPLES OF PLASTICS IN COMPUTER PRODUCTS

  • Front fascias for desk top computers.
  • Shell cases for portable computers.
  • Internal fixings for desk top and portable computers.
  • Monitor housings and supports.
  • Keyboard cases and buttons
  • Mouse and other pointer shells.
  • Printer housings and shells.
  • Speaker housings.
  • Storage media (CD) and storage media cases.
  • Removable storage media housings (CD and other drives).
  • Miscellaneous small parts.

THE KEY LESSONS

  • Multi-national companies are driving the formation of new supplier structures to service world-wide demands.
  • Sophisticated and world-wide logistics capabilities are becoming more important to the customer than high technology capability.
  • Sub-assembly production rather than simple component production is becoming the only way to capture multi-national business. The supplier is responsible for being a "solutions provider" producing a complete innovative assembly rather than a single product.
  • e-business is set to become a driving force in supplier selection.
  • Price, technology and innovation are important but having the right logistics is more important.
  • The creation of strong long term relationships and clear defined communication channels is essential.

GROWTH PROSPECTS

The computer market has been subject to explosive growth and this has not slowed in volume terms. Global competition has reduced prices and production is now globally based (sometimes in emerging economies) and requires more than plastics processing skills.

The PiP Programme consists of a range of activities including:

  • Business Workshops and Reports
  • Plasticity Seminars
  • Pentamode Code of Practice

Note: Any opinions expressed in this Business Workshop Report represent those of the author and not necessarily those of the BPF, DTI or IBM United Kingdom Ltd.

Produced for the PiP Programme by Tangram Technology Ltd. (info@tangram.co.uk)

For further information about the PiP Programme contact:

The British Plastics Federation
6 Bath Place
Rivington Street
London EC2A 3JE
Tel: 0171 457 5000
Fax: 0171 457 5045

This Business Workshop Report is based on the results of a PiP Business Workshop held in July 1999. The customer viewpoint at the Workshop was presented by Mr. Ian Ross of IBM United Kingdom Ltd.

August 1999

All logos and trademarks acknowledged. The assistance of IBM United Kingdom Ltd. in the provision of logos and artwork is also gratefully acknowledged.