Doug - More reasons to think that SFLX will do OK, or at least will be merger/acquisition candidate, limiting downside risk. Note that "worldwide demand for contract manufacturing services, $ 15 billion in 1990, will exceed $ 117 billion by 1999, according to Technology Forecasters Inc. The United States and Canada will command 54 percent of that work." What other industries can you name that will have a eight fold increase in revenues in the decade of the 90's?
Yes, I picked up another 1,900 shares this moring at 11 5/8, and bought 500 shares of SEMX at the market. If SFLX tanks, please buy an apple from me on the corner <g>. The risk here on the downside is limited to $8 a share in my opinion, which would be a substantial loss for me and would hurt, but the upside is $20-30 a share or more by sometime next summer. Not bad odds, I'll take them. Just my opinion.
Best - Joe
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Copyright 1997 Orange County Register
THE ORANGE COUNTY REGISTER
August 18, 1997 Monday MORNING EDITION
Virtual manufacturers their own reality; They have no employees, factory or machinery. They contract everything from engineering to marketing and assembly.
JAN NORMAN, The Orange County Register
Laurel Electronics Inc. of Newport Beach will sell $ 750,000 in digital-monitoring devices this year.
But don't look for Laurel Electronics' factory in Irvine Spectrum, Savi Ranch or some other high-tech industrial park. The manufacturer's worldwide headquarters is President Barrett Weekes' dining room table.
Laurel Electronics is a virtual company.
Service businesses without corporate offices, employees or equipment are well-known. But a manufacturer without workers, factory or machinery?
A growing number of manufacturers are contracting for everything from product engineering, marketing and assembly. Worldwide demand for contract manufacturing services $ 15 billion in 1990 will exceed $ 117 billion by 1999, according to Technology Forecasters Inc. The United States and Canada will command 54 percent of that work.
Virtual manufacturing enables start-ups like Laurel Electronics to grow faster with fewer assets and employees and less space than their smokestack ancestors.
Success depends on greater discipline, communication and planning, says Laguna Niguel consultant Richard Dadamo.
RECENT DEVELOPMENT
Virtual manufacturing was almost unknown in 1965 when Weekes founded Newport Electronics in Santa Ana, a gauge and clock manufacturer that he left in 1989.
As Newport Electronics received more orders, it hired more workers and rented more industrial space. It could have used assembly houses in Mexico but transit time was two to three days and quality was difficult to monitor long distance.
Today, Weekes says, international trade is much easier: communication and transportation are cheaper, workers are better-trained and high-tech industries are supported by a more developed infrastructure.
When Weekes launched Laurel Electronics to make monitoring devices for utilities, aerospace and other industrial companies in 1993, "I knew my finances were limited, so I looked for inexpensive solutions that might notbe the most elegant. "
The solution was virtual manufacturing.
DO WHAT YOU DO BEST
"In college you can fail in one subject, excel in four others and still meet degree requirements," Weekes says. "In business, if you fail in one area, it drags the whole company down. "
Virtual manufacturing allows the owner to do what he or she does best and farms out the rest of the work to allow others to do what they do best, Dadamo says, "and not get bogged down in building a manufacturing operation. "
Weekes, for example, had product design work done by his former executive vice president of engineering at Newport Electronics. He also contracted out Laurel's tax preparation and some financial work.
Most important, Weekes hired individual homeworkers and SAS Manufacturing, a contract manufacturing firm in Corona, for most product assembly.
DRAW ON INDUSTRY RELATIONSHIPS
Weekes had little difficulty finding quality contractors because of his 40 years' experience in the electronics industry in Southern California.
"You get to know all the players in an industry," he says. "I knew more people than I had need for when I started Laurel. "
One was SAS General Manager Ted Smit, who had worked for Weekes at Newport Electronics and quit to start an electronics assembly house about six years ago.
Smit says he's always marketing his services to other manufacturers and now has 16 customers, some of which are virtual firms like Laurel while others are large companies with overflow work.
DOCUMENT CAREFULLY
Virtual manufacturers must take greater care in documentation for subcontractors and in communicating with them, Weekes says. If the documentation for building a product is imprecise, the product will be riddled with errors, he says. As it is, prototypes inevitably have glitches.
"When you farm something out, if you don't have instant feedback (on defects and other problems), quality will suffer," he says.
Weekes and his partner, Jim Way, test every product and track failure rates. This information helps Laurel Electronics to improve its documentation and SAS to improve the manufacturing.
As the quality rates improve, Weekes says he will consider havingSAS test on-site for faster feedback and allowing SAS to ship directly to customers, which can save money.
SOME DRAWBACKS
"Utilizing an outside source requires far more discipline in the product design and specifications, because continual changes and modifications can break down the partnership relationship," Dadamo says. "Also, more thought must be put into the schedule requirements, and this forces forecasting to be improved to lessen the risk. "
As Laurel Electronics grows, Weekes expects the company to be less virtual.
In fact, he soon will move the company from his home to a building by John Wayne Airport, near bus stops for workers so he can bring some of the manufacturing in-house so that Laurel Electronics can react more quickly to a customer's rush order.
FAST TRACK
Advantages of outsourcing some or all manufacturing tasks:
Reducing and controlling operating costs
Accessing resources and talents not available in-house
Focusing on what company does best
Freeing company resources for other duties
Accessing world-class capabilities
Sharing risks
Giving difficult functions to experts
Allowing company greater production flexibility without frequent layoffs and hiring blitzes
Outsource Institute
GRAPHIC: COLOR PHOTO; OFFICE IN THE HOME; Laurel Electronics Inc. President Barrett Weekes, right, and partner Jim Way test every product and track failure rates. As Laurel Electronics grows, Weekes expects it to be less virtual. LANGUAGE: ENGLISH |
