Before wrapping up for the weekend on Friday, I read all the stories about the economic recovery sitting in my in-basket. There were 8. I have no idea how I was selected to receive this plethora of prognostications, maybe it’s in punishment for being a Blogger? Blog and ye shall be blogged! Somehow that seems appropriate.

Anyway, what I noticed was that 4 of the emails were up-beat; “The recession is over” and 4 were completely doom and gloom; “Don’t count on one iota of improvement until 2018!” Fortunately, interpreting this dichotomy as the glass being either half-full or half-empty reminded me that I needed to go to Costco before all the cheap libations were gone.

So after firing up my gas-guzzling, over priced micro-vehicle that gets 36 MPG on television but only 18 on planet Earth I cranked up the volume of my 2.3 watt sound system and waited in anticipation to see which album my (demonically possessed) CD changer would select for my enjoyment…

There’ll be blue birds over the white cliffs of Dover, tomorrow, just you wait and see!

All right! Disk two of the Righteous Brothers anthology, “The White Cliffs of Dover.” What a great tune, boy does that bring back memories. When was it 1965, 1966? Must have been ’66, but can’t remember for sure which year? Ah, The White Cliffs of Dover, the Righteous Brothers, too cool!

Then I thought to myself, you know these lyrics really are up-beat, “There’ll be blue birds over the white cliffs of Dover” and it can’t be a coincidence that this song played immediately after the 4/4 tie on the debate about the recovery! So I decided to call it, once and for all, the white cliffs of Dover were the tie breaker – no question about it. Glass half-full.

After getting home with my booze (unopened) I couldn’t get the ’65 or ’66 question out of my mind… So I Googled it.

Words – Nat Burton
Melody – Walter Kent
Published – 1941

 Hey, wait a minute 1941!?

“’There`ll Be Bluebirds Over the White Cliffs of Dover’ is one of the most famous of all the World War II era pop classics. It became a sensational hit in 1942, as it reflected the feelings of all the Allies towards the British people in their brave fight against Hitler. Originally released in the U.S. by bandleader Kay Kyser, four other artists also hit the top 20 with this song that year: Glenn Miller, Sammy Kaye, Jimmy Dorsey and Kate Smith. The most well known version of the song on this side of the Atlantic is probably the one recorded by Vera Lynn in 1942. Other artists who`ve recorded this standard include: Connie Francis, Bing Crosby, Jim Reeves, and The Righteous Brothers.”

Ah, this is WWII song? (The war to end all wars – no forget that, that was WWI). How could this be a WWII song about B-24 Liberator bombers over the coast of England played by some dudes and a dudette named Glenn Miller, Sammy Kaye, Jimmy Dorsey and Kate Smith? There aren’t any bluebirds in England (are there?) That isn’t very uplifting. I’ve never even heard of bandleader Kay Kyser, what a rip-off! This is a Righteous Brothers tune; I saw them perform it in concert in ‘65 or ’66.

I don’t care what anyone says, Blue Birds over the white cliffs of Dover is the tie-breaker in the battle for economic recovery; half-full or half-empty simply isn’t acceptable – we’re using it as the tie-breaker, period end of quote!

Disgusted with all things Google, I went outside to get some air.

Within 30 seconds a torrential rain started and I was almost struck by lightning but I don’t consider either of those events to be a sign or omen of any type. Don’t worry my friends, the outcome is clear… There’ll be blue birds over the white cliffs of Dover, tomorrow, just you wait and see!

Here’s one of Charlie’s articles that appeared recently in EMS007.

When you conduct research, teach and provide consulting services for a living, you get asked lots of questions. Most are pretty easy when we’ve already done the research, like “What is the current labor rate in China?” Some are a little more challenging, as the answer is dependent on more than one variable requiring a little number crunching and some analysis, for instance, “Will the labor rates in China increase?” Then there are the tough ones that require not only data and analysis, but also current and applicable experience, e.g., “How much are the labor rates in China going to increase and how soon?”

Read more>>

Medieval scholars and church officials, arguably the management consultants of their age, cite a list of attitudes to avoid, in an effort to get their clients on track toward a good life. The “Seven Deadly Sins” were first developed by John Cassian in the 5th Century, and then refined by Pope Gregory a hundred years later. This list inspires poets, artists, blog writers and comedians, among others, to this day. A more positive spin on the list, called the “Seven Holy Virtues,” was developed by Aurelius Clemens Prudentius in his epic poem Psychomachia around 410 AD.

Ultimately, the principles of both the Seven Deadly Sins and their heavenly counterparts are intended to provide guidelines to better relationships. Based on our research and experience over the past 20 years in the electronics manufacturing industry, it is my belief the outsourcing relationship as practiced in the 21st Century is fundamentally broken. This is not entirely due to the behaviors and attitudes of those hardworking men and women who practice this noble profession, but it is clear the entire industry is experiencing a seismic shift. Some might even say future generations of electronics manufacturers will look back at this time as the Dark Ages of electronics because of some glaringly irrational behaviors. Hopefully, future generations will not dump electronic waste into landfills of the future six months after purchase as a result of shoddy workmanship, poor design or counterfeit components. As the industry re-engineers itself, I humbly offer to the esteemed readers of Circuits Assembly a series of articles intended to get us back on track to the good life we all would like to deserve.>>More

The first, and arguably most destructive, of the problem behaviors is pride/self-righteousness. Known in Greek drama as hubris, it has led to many an heroic downfall. Our company tracks a wide spectrum of actual electronics manufacturing programs of all sizes in a variety of end-markets. The failures are most instructive. And we have found the root cause of most failures is Superbia, or pride/self-righteousness. More >>

As we repeatedly have noted, the electronics industry has ignored several fundamental tenets of business over the past decade, leading to the current unsustainable situation. It is our contention one of these fundamental errors – or sins, in 16th century terms – is that of Avaritia. When greed takes over the OEM-supplier relationship, it becomes asymmetrical, more akin to a master-slave relationship. More>>

The third of the SALIGIA  traits which make up the Seven Deadly Sins of Outsourcing is “Luxuria” or lust. While the common interpretation focuses on the carnal, in outsourcing it translates to “lavishness,” or lust for power or recognition through insistence on the outward trappings of luxury. More>>

In outsourcing, Envy – or imitation – is neither fun nor useful.

The fourth of the Seven Deadly Sins is one of our favorites. In fact, it was the inspiration for this series of columns. Envy is unique in that it is the only sin that lacks a pleasurable angle. It is in no way fun – just mean-spirited and sad. Envy can be summed up by this quip from H.L. Mencken: “Happiness is making $10/hour more than your brother-in-law.” When you rejoice in another’s misery, you are at the bottom of the barrel. More>>

The fifth deadly sin in our series is that of Gluttony, which typically refers to eating too much food. Because most electronics manufacturers are not in the habit of eating printed circuit boards, how does that translate to outsourcing?

In contrast to the sins of Greed or Avarice, Gluttony focuses on the destructive consequences that occur when we consume blindly without appreciation. It’s the difference between a gourmet who savors and a gourmand who gobbles: The latter seeks quantity, not quality, piggishly exhausting resources and looking around for more. An OEM that believes in unlimited EMS manufacturing capacity, and jumps from one geography to another chasing penny savings in labor costs, is blind to the value of manufacturing. That OEM disregards the decades of tribal knowledge the EMS supplier has acquired, and the complexity of the skills required to build electronics. More>>

The sixth deadly sin is Ira or Wrath.

Anyone who has worked in the corporate world may be familiar with this scenario: Something goes wrong on one side of an OEM-EMS relationship; perhaps it was production quality, or maybe just a miscommunication about an ECO; perhaps a forecast was revised and then revised again, but no one sent the second change to the rest of the supply chain; or a software glitch prevented a payment from going out within the term’s deadline. Humans are the conductors of business, and humans make mistakes. Usually mistakes are fixed, and everybody moves on. But this time the “higher ups” heard about it and a meeting has been called.

Stay with me. Some people at the meeting know what’s happening and others have no idea, adding to the tension in the room. Most people are quietly looking down at their notebooks, scribbling nonsense in an attempt to look busy. Whoever happens to be highest in the pecking order in that particular configuration stands up and starts yelling, red-faced with veins bulging, ensuring more drama and silence. Everyone feels extremely uncomfortable. The emotional demonstration is designed to psychologically beat down the offending party. Whoever made the mistake is silently plotting revenge.

Net result: Productivity for the month among this particular business team plummets. The relationship between the two organizations is damaged. Thoughts such as, Why do I put up with this? enter everyone’s minds, and workers plot exit strategies More>>

Watch for the last article in the September issue of Circuits Assembly magazine.

Charlie Barnhart & Associates LLC invites you to listen to the recording of this webcast.
Topic: Q3 Industry Update
Host: Charlie Barnhart & Associates LLC
Date: Monday, July 27, 2009
Time: 11:00 am, Pacific Time

Session Number: 854 859 230
Registration Password: This session does not require a registration password.

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To listen to this webcast:
https://jenniferread.webex.com/jenniferread/lsr.php?AT=pb&SP=TC&rID=31352692&rKey=5bb92ea08b1b5441&act=pb

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For assistance
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You can contact Charlie Barnhart & Associates LLC at:
jennifer@charliebarnhart.com

Global EMS Costs:
The underlying burdened cost of labor for electronics manufacturing services was basically unchanged in May/June net of currency translations which were generally unfavorable for North American OEMs. Short of a significant reversal in valuation trends of the USD$ the burdened cost of labor for electronics manufacturing services in Q3CY09 are expected to be: flat to very slightly lower in Mexico; marginally higher in Canada, Eastern Europe, Japan, China and Australia; and flat in the balance of the major global geographies.

EMS Margin Expectations:
Margins in all sectors (except Automotive) are expected to remain relatively constant in Q3CY2009 as backlogs and book-to-bill ratios stabilize. Some upward fluctuations in Mil/Aero & Automotive look likely as does select downward pressure in Communications and Medical on perceived strength of individual OEM’s product offering.  Historically, during times of falling demand in the EMS industry average margin expectation tends to be flat to slightly down. 

EMS Capacity & Lead-times:
Lead-times are expected to remain relatively flat to slightly down (except with ODMs in China where they have been lengthening) and are expected to improve slightly over the balance of the second half of CY09 as demand is expected to remain soft as a result of the global economic situation.

To download the most recent report and other updates, first register and then go to Data page and download the PDF. Charlie Barnhart & Associates LLC is now offering this valuable data at no cost to qualified industry professionals. To sponsor this effort, please contact Jennifer Read, jennifer@charliebarnhart.com, or Eric Miscoll at eric@charliebarnhart.com.

Charlie Barnhart & Associates LLC has launched an online EMS-OEM Liaison program enabling OEMs to quickly and easily identify companies to consider for their electronics manufacturing services supply solution. The program comprises  a sponsorship program that includes custom webcasts and communications activities; and a searchable ‘CBA EMS Index’ to help OEMs connect with companies that provide the specific services they need.

In addition to information about the EMS community, the new online business will allow access to Charlie’s valuable ‘Leading Indicators’ at no charge. Qualifying OEMs and EMS companies can now access data on Global Labor Rates, CBA’s proprietary Geographic Risk Factors, capacity utilization rates, and much more.  This data is the foundation of Charlie’s proprietary Single Enterprise , EMSPro Workshop and Outsourcing Navigator Methodologies used by hundreds of OEM operations directors who have integrated Charlie’s data into their EMS strategic planning activities.

Charlie’s Leading Indicators are based on his proprietary data collection methodologies. Enabled by his deep industry expertise and long-time contacts within the OEM and EMS community, Barnhart benchmarks proposals and quotations from a balanced selection of OEMs in the major industry segments. He then aggregates the data by extracting and normalizing the pricing and assumptions upon which the pricing is based, using his proprietary Global Pricing Methodology. There is no other way OEMs can see this kind of objective snapshot of EMS service pricing The data are near real-time, and represent  an extremely broad spectrum of projects, both in terms of scale and industry, and based on pricing that is being offered now. His risk factors and trend analyses  are not speculation, or projections, but are based on this rigorous, data-driven approach.

“My methodologies are founded on GAAP-standards, and in case after case, we are seeing proof that  many of the assumptions about electronics outsourcing in operation today among OEMs are dead wrong,” Barnhart explained. “When we conduct our EMSPro and Single Enterprise Methodology workshops, OEMs are invariably stunned at the benchmark data we are able to show them about their own total costs of outsourcing. That’s why we decided to offer these data to the broader community at no charge. We want more OEMs to execute better, more rational outsourcing strategies, using the EMS companies we know operate with the kinds of efficiencies and economies that can make the industry viable again.”quarter’s

In addition to offering Leading Indicators at no charge, the firm will bring companies in the supply chain to the OEM community’s attention via “Charlie’s Spotlight”. The company spotlighted this quarter is California-based Victron, Inc.

Sponsors for the initial launch include Creation Technologies, and SMS Technologies. A webcast about the new service is scheduled for July 27th.

To learn more about the EMS-OEM Liaison Service, contact Eric Miscoll, eric@charliebarnhart.com, 817-235-8698.

Charlie’s Leading Indicators data update service will only be offered to qualified individuals who complete the  contact form at http://charliebarnhart.com/contact/

Editors: Contact Jennifer Read to set up interviews.
623-293-6985
jennifer@charliebarnhart.com.

Charlie Barnhart discusses his work debunking EMS industry myths with the EMSPro Workshop for OEMs.

Interview with iConnect007’s Steve Gold.

During an early morning conversation about today’s ultra competitive global marketplace and how companies who require Electronic Manufacturing Services must not only weigh the risks but also balance them against the perceived benefit of a bewildering array of potential supply solutions, a surprisingly simple list of observations emerged. 

1. Labor costs in all geographies are going up and if you haven’t experienced these increases yet, you will.
2. While lower purchase price is always attractive it is NOT the only price that’s paid.  
3. Costs above purchase price (both internal and external) increase as the supply solution becomes progressively remote.
4. Risk increases with both the remoteness of the supply solution and the complexity of the requirement, from not only a technical but also an expectation perspective.
5. There is a tipping-point between the capabilities of a supply solution and the requirements of an OEM. We know from case-study analysis that if this point is reached catastrophic failure will result.
6. The wholesale application of cross-hemispheric solutions is not going to be tolerated as the standard course-of-business in the future, if for no other reasons than global climate change and corporate social responsibility.
7. Ultimately, a large percentage of Outsourcing will shift (back) to a same-hemisphere strategy, as it’s a trend that’s both inevitable and beneficial to not only the planet but also the EMS industry and its regional communities.

Simple but certainly not uncomplicated.

I think it’s time for that second cup of coffee!

 Charlie