Feature Article

Eastern Europe: a Mosaic of Outsourcing Opportunities


Posted in Supply Chain by Camilla Andersson on February 8, 2013

EU member states that were formerly part of the Eastern Bloc are all over the map in terms of global competitiveness. An EMS supplier to medtech manufacturers explains why it chose to locate its facility in Poland, rather than in one of the EMS giants in the region, and how that benefits its customers.


Unlike many consumer products, medical contract manufacturing typically requires a skilled labour force, strong quality management disciplines, excellent systems for traceability and device history recordkeeping and the ability to support high-mix and/or low-volume production. In selecting the right electronics manufacturing services (EMS) provider, criteria beyond contractor capabilities should be evaluated. Factors to consider include economic trends in the region, workforce availability, education, turnover and logistics.

Regional economic trends

Employees at the Kimball Electronics facility in Poznan, Poland, manually inspect and assemble PCBA components.

In terms of manufacturing outlays and hidden costs, labour markets can be loosely grouped into three categories: emerging, established and mature. A given country can have multiple labour markets. As an example, overall the United States constitutes a mature labour market. However, variations in levels of employment, state regulatory policies, age of the available workforce, level of unionisation, cost of living and dominant employers in the region can change the cost structure. Each type of market category has tradeoffs.

Emerging markets are characterised by:

  • low labour costs;
  • an inexperienced workforce;
  • inefficient labour utilisation because of overspecialisation or lack of automation;
  • focus on consumer goods with lower quality expectations;
  • minimal infrastructure;
  • gaps in supply base;
  • difficulty in communications;
  • high potential for cost surprises.

Established markets are characterised by:

  • better labour utilisation and existing skills mix;
  • higher turnover in popular regions;
  • increasing use of automation, but equipment may be old or region-specific;
    preference for high-volume business models;
  • fairly comprehensive supply base (but service issues may be present);
  • possible communications issues;
  • market popularity may drive cost increases.

Mature markets are characterised by:

  • best skills mix and labour utilisation;
  • higher technology automation;
  • strong focus on high-level quality systems and continuous improvement initiatives;
  • specialised supply chain;
  • strong communications and programme management focus;
  • business-friendly environment;
  • good technical and educational infrastructure;
  • predictable costs;

Evolutionary stages
Eastern Europe’s manufacturing centres represent the full spectrum of these evolutionary stages. Countries such as Hungary and the Czech Republic have the largest EMS infrastructure, but they also have the higher costs and turnover issues that come with the evolution from an established to a maturing market. Turkey has relatively low labour costs, but harbours many of the tradeoffs associated with an emerging market.

The overall economic climate in a given country can impact a contractor’s ability to grow, hire qualified workers, meet production and delivery schedules and operate in a predictable cost structure.

 Table I: Overall rankings for former Eastern Bloc EU Members1

As shown in the World Economic Forum’s Global Competitiveness Index1 in the Global Competitiveness report, the former Eastern Bloc EU member states vary widely in global competitiveness rankings. (See Table I.)

Understanding the economic trends in a particular country can help predict the probability of cost increases or labour shortages driven by economic policies.

As an example, Kimball Electronics chose Poland and established its initial operation in Poznan in 2000. Although both Hungary and the Czech Republic were the more popular choices for EMS providers at that time, Poland has turned out to be a better long-term choice. The region has seen positive economic growth over the last decade. From an economic and business perspective, there are no barriers: there is still substantial growth potential without significant inflationary pressures. Comparatively, the EMS clusters in Hungary and the Czech Republic have focused on high-volume production, which has in turn driven inflationary pressures. Economies and cost structures in these more mature countries have grown and outpaced the cost structures the company has seen in Poland. Turnover is also higher in these more mature markets.

Workforce factors
Workforce availability, education and turnover are other factors to evaluate. Access to higher education and training can be critical in ensuring availability of workers with the higher level of skills needed in a high-mix, variable-demand production environment focused on mission-critical products. Table II shows a sampling of country rankings for higher education and training in the World Economic Forum’s Global Competitiveness report. According to the report, this set of rankings measured secondary and tertiary enrollment rates and the quality of education as evaluated by the business community. The extent of vocational and continuous on-the-job training was also taken into account.

 Table II: Higher education and training rankings for former Eastern Bloc EU Members2

Other factors to consider include:

  • language skills of engineering and programme management;
  • labour market dynamics such as turnover and availability of employees with required skills;
  • number of projects of similar size and scope in the facility;
  • quality of data collection systems.

An EMS company’s existing experience with high-mix and variable-demand programmes is particularly critical. Switching from a high-volume to a high-mix, variable-demand environment not only represents process change, it may also represent a fundamental cultural shift.

For example, Kimball acquired its initial facility in Poland from an OEM. Converting the workforce from a group focused on meeting the needs of a single company in a single industry to running a mix of projects for multiple companies over multiple industries was a training challenge.

Originally, employees were focused fairly narrowly in terms of job skills. As the company’s customer base grew in size and diversity, so did the need for greater flexibility in production activities on the floor. The requirement to maintain headcount meant that operators needed to be trained for several job stations. Initially, employees were uncomfortable with multitasking. They were accustomed to doing the same job repetitively. The company created an incentive programme that rewarded employees willing to expand their skills and knowledge through training. The rewards included promotion opportunities and pay increases. Some employees embraced this; others did not.

The new programme created a core group of employees called multi-operators. When demand varies, employees can be shifted between production lines. To qualify as a multi-operator, the person must be trained and certified for 60% of the job stations within the production area.

A strong management development programme was also launched. Polish managers were accustomed to a hierarchical structure where focus was placed on pure efficiency. Softer management skills weren’t part of the culture of the acquired facility. Kimball began including the facility in its Vision and Guiding Principles Surveys in 2004. In 2007, the Polish group included an additional step in the survey process to provide group leaders and production unit leaders with 360 degree feedback on soft management skills. Employee comments on areas needing improvement in previous guiding principle surveys were used as criteria in the feedback process.2

Turnover is one of the key measures used to track the success of employee development programmes. From a voluntary turnover perspective, Kimball’s Poland facility has averaged less than 1% turnover per month during the past year, in spite of the fact that the company relocated operations to a new facility, thereby lengthening commute times. Management tenure in the facility averages 10 years.

This example illustrates the level of cultural change required to refocus a facility on high-mix, variable-demand production. In this case, the results of a multiyear programme included turnover that is below labour market averages. Workforce stability has a direct impact on quality in complex projects. Consequently, supplier audits should look closely at:

  • factory turnover compared with averages in the region;
  • alignment of operator training and certification programmes and workforce utilisation strategies with high-mix, variable-demand production;
  • widespread use of tools such as lean manufacturing or Lean Sigma to drive a strong focus on efficiency and continuous improvement.

Logistics
Another factor to consider is where products are likely to be shipped. Aspects to take into account include:

  • whether or not the country belongs to the European Union;
  • transport options and likely costs;
    quality of the logistics-support infrastructure;
  • geographic proximity to predominant end markets or distribution centres.

Kimball’s choice of Poznan, Poland, offered significant advantages from a logistics standpoint. Poland is part of the European Union, so there is no barrier to market entry. From a logistics perspective, the facility is located 130 km from Gdansk, which is Poland’s largest port. Export to Hamburg is also easy. Munich and Frankfurt have direct links. Many customers have distribution centres in Germany and transport time to these centres is less than 24 hours.

Putting it all together
Eastern Europe offers a variety of EMS options. Selecting the right one requires careful evaluation of contractor capabilities as well as the alignment of a country and labour market with a project’s long-term needs. Key factors to evaluate carefully include:

  • experience of a particular facility with high-mix, variable-demand production;
  • inflationary pressures in the country and labour market;
  • overall economic stability of a particular region;
  • availability of skilled labour and average turnover in the region;
  • how systems and processes in the facility align with programme requirements;
    language skills of the programme team;
  • quality of logistics support and predictability of logistics costs;
  • proximity to preferred distribution centres and end markets.

References
1. World Economic Forum, 2010, The Global Competitiveness Report
2. S. Mucha, “Investing in Employees Is Still in Vogue,” Printed Circuit Design & Fab, 27, 4, (2010).

 

Tom Ferris is
Director of Business Development at
Kimball Electronics Group’s Medical Solutions, 6 Derra West, Listowel, Co. Kerry, Ireland
tel. +353 68 577 96
email: tom.ferris@kimball.com
www.kimball.com



Find more content on:
No votes yet


Login to post comments

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Thanks for sharing the post..

Thanks for sharing the post.. parents are worlds best person in each lives of individual..they need or must succeed to sustain needs of the family.
http://www.rebelmouse.com

It laborious to seek out

It laborious to seek out knowledgeable folks on this matter, but you sound like you already know what you are talking about! Thanks
hospedaje web

It was wondering if I could

It was wondering if I could use this write-up on my other website, I will link it back to your website though.Great Thanks.
Kirigamine

Great content material and

Great content material and great layout. Your website deserves all of the positive feedback it’s been getting.
phen375 official website

hwa home warranty reviews

This is also a very good post which I really enjoy reading. It is not everyday that I have the possibility to see something like this.
hwa home warranty reviews

I have read your article, it

I have read your article, it is very informative and helpful for me.I admire the valuable information you offer in your articles. Thanks for posting it..
visit this site

I recently came across your

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog, I will keep visiting this blog very often.
free minecraft account list

Thanks For sharing this

Thanks For sharing this Superb article.I use this Article to show my assignment in college.it is useful For me Great Work.
pregnancy miracle method

Thank you for helping people

Thank you for helping people get the information they need. Great stuff as usual. Keep up the great work!!!
how to get rid of acne

between the lampposts and

between the lampposts and lashing me with even rain-shots as I battle to control my intensely laden Honda Parader bike over broken cobbles. I'm en route into Bucharest downtown area and longing.. check this website

Es erwartet Sie ein

Es erwartet Sie ein informativer Mix aus Fachartikeln, Aussteller-Highlights und Messeinformationen, um Ihnen einen Vorgeschmack auf die bevorstehende MEDTEC zu gebe . blog comments back links

be regulated by both,

be regulated by both, depending on the method of action, i.e. how the drug is administered to the end user through the device. If the drug system is active in a pharmacological mode of action then the Orange Guide would be applied. cheap price backlinks

Thanks for sharing this

Thanks for sharing this quality information with us. I really enjoyed reading. Will surely going to share this URL with my friends.

chessboard

I was surfing net and

I was surfing net and fortunately came across this site and found very interesting stuff here. Its really fun to read. I enjoyed a lot. Thanks for sharing this wonderful information.
football betting tips

Factors to consider include

Factors to consider include economic trends in the region, workforce availability, education, turnover and logistics. click here for info

It was wondering if I could

It was wondering if I could use this write-up on my other website, I will link it back to your website though.Great Thanks.

online payday loans

Packers and Movers India

Thanks for post this helpful post - Please visit for More information about -
Packers and Movers in Delhi
Packers and Movers in Bangalore
Packers and Movers in Gurgaon
Packers and Movers in Pune

Packers and Movers India

Thanks for Nice and Informative Post. This article is really contains lot more information about This Topic. -
Packers and Movers in Noida
Packers and Movers in Thane
Packers and Movers in Navi Mumbai
Packers and Movers in Ghaziabad
Packers and Movers in Faridabad

Packers and Movers India

Thanks for post this helpful post - Please visit for More information about -
Packers and Movers in Hyderabad
Packers and Movers in Pune
Packers and Movers in Mumbai
Packers and Movers in Chennai

Factors to consider include

Factors to consider include economic trends in the region, workforce availability, education, turnover and logistics. loft conversions kent

I read this article. I think

I read this article. I think You put a lot of effort to create this article. I appreciate your work προωθηση ιστοσελιδων

Factors to consider include

Factors to consider include economic trends in the region, workforce availability, education, turnover and logistics. ProsCasinos

I can see that you are an

I can see that you are an expert at your field! I am launching a website soon, and your information will be very useful for me.. Thanks for all your help and wishing you all the success in your business.
https://www.rebelmouse.com/

This type of message always

This type of message always inspiring and I prefer to read quality content, so happy to find good place to many here in the post, the writing is just great, thanks for the post.
Rebelmouse

I like your post. It is good

I like your post. It is good to see you verbalize from the heart and clarity on this important subject can be easily observed.
http://vitiligomiracledownload.com

You’ve got some interesting

You’ve got some interesting points in this article. I would have never considered any of these if I didn’t come across this. Thanks!.

obat kuat herbal

Superbly written article, if

Superbly written article, if only all bloggers offered the same content as you, the internet would be a far better place..
rebel mouse

Hi there, I found your blog

Hi there, I found your blog via Google while searching for first aid for a heart attack and your post looks very interesting for me.
rebelmouse com

Hi there, I found your blog

Hi there, I found your blog via Google while searching for first aid for a heart attack and your post looks very interesting for me.
rebelmouse com

Hi I found your site by

Hi I found your site by mistake when i was searching yahoo for this acne issue, I must say your site is really helpful I also love the design, its amazing!. I don’t have the time at the moment to fully read your site but I have bookmarked it and also add your RSS feeds. I will be back in a day or two. thanks for a great site.
Astuce Clash of Clans

home warranty companies reviews

Good post. I learn some thing tougher on distinct blogs everyday. Most commonly it really is stimulating to learn to read content material from other writers and exercise a specific thing there.
home warranty companies reviews
top rated home warranty companies

home warranty arizona

A very awesome blog post. We are really grateful for your blog post. You will find a lot of approaches after visiting your post. I was exactly searching for. Thanks for such post and please keep it up. Great work.
home warranty arizona
what is warranty

I also benefit from learning

I also benefit from learning the assessments, but learn that alot of people ought to stay on essay to try and add worth in the direction of the authentic weblog release.
buy youtube views reseller

I found that site very

I found that site very usefull and this survey is very cirious, I ' ve never seen a blog that demand a survey for this actions, very curious...
ways of getting your ex back through text messages

Pretty good post. I just

Pretty good post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts. Any way I'll be subscribing to your feed and I hope you post again soon. Big thanks for the useful info.
diane neal measurements

Great Article it its really

Great Article it its really informative and innovative keep us posted with new updates. its was really valuable. thanks a lot.
cbs8.com

I surprised with the analysis

I surprised with the analysis you made to make this particular publish incredible. Wonderful activity!
Dog eating festival

Thank you for helping people

Thank you for helping people get the information they need. Great stuff as usual. Keep up the great work!!!
latest mobiles

This is a great inspiring

This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post.

http://www.teaterdating.com/techniques-to-help-turn-that-girl-friend-into-a-girlfriend

Keep up the fantastic

Keep up the fantastic piece of work, I read few blog posts on this web site and I believe that your site is real interesting and has lots of great information.
Victorino Noval Los Angeles

Thanks for taking the time to

Thanks for taking the time to discuss that, I feel strongly about this and so really like getting to know more on this kind of field. Do you mind updating your blog post with additional insight? It should be really useful for all of us.
private air charter

http://www.stumbleupon.com/stumbler/buyfacebooklik

Mmm.. good to be here in your article or post, whatever, I think I should also work hard for my own website like I see some good and updated working in your site.
Buy Facebook fans

I think this is an

I think this is an informative post and it is very useful and knowledgeable. therefore, I would like to thank you for the efforts you have made in writing this article.
read my review

https://www.youtube.com/watch?v=juX4jmjdu4s

Pretty good post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts. Any way I’ll be subscribing to your feed and I hope you post again soon.
Buy Facebook Likes

This is just the information

This is just the information I am finding everywhere. Thanks for your blog, I just subscribe your blog. This is a nice blog.. dong ho deo tay nu

Very useful info. Hope to see

Very useful info. Hope to see more posts soon!.
http://wsls.com/story/27971908/news

This is a great post. I like

This is a great post. I like this topic.This site has lots of advantage.I found many interesting things from this site. It helps me in many ways.Thanks for posting this again.
https://www.rebelmouse.com/crackthegirlcodereviews/

This article is quite good

This article is quite good and interesting! that give us valuable information and great thoughts.Thank for sharing this such a good article of yours.
looking forward more Buy Reverbnation Packages

I would like to thank you for

I would like to thank you for the efforts you have made in writing this article. I am hoping the same best work from you in the future as well. In fact your creative writing abilities has inspired me to start my own BlogEngine blog now. Really the blogging is spreading its wings rapidly. Your write up is a fine example of it. girlsdoporn

Main

Pengobatan terkini untuk berbagai penyakit salah satunya penyakit kanker kelenjar getah bening stadium 4 sudah bisa dilakukan secara herbal dengan obat herbal ace maxs murah atau penyakit limpa bengkak dengan jelly gamat gold g dimana kedua obat herbal tadi memang sangat bermanfaat untuk mengobati berbagai penyakit, jika dilihat dari kandungan dan khasiat jelly gamat gold g dirasa sudah sangat lengkap, sebab terdapat banyak manfaat yang sama sama baik untuk menunjang kesehatan dan mejaga kesehatan. harga jelly gmata murah