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How To Compete with Asia and Win

What is the ultimate goal of customer service? At DC Electronics, a wiring harness and cable assembly company headquartered in San Jose, California in the Silicon Valley, every employee can answer this question. As their service policy boldly states, “Customer success is everything.

With global sourcing now a common fact of life, the factors impacting customer success are shifting. To stay one step ahead of those changes, DC has expanded their focus on service to include not just error-free, on-time production and delivery, but also a new, cutting-edge approach to commodity management. By taking on more responsibility for this function, DC can lower customer costs beyond global price savings, giving their customers and their own company a strong competitive advantage.

“We are commodities managers. We do it all”, says VP of Sales and Marketing, Chris Hinshaw. “It’s about maximizing services and efficiencies for total cost reduction”. Hinshaw says this push toward commodities management is the key to DC’s success. “We offer our customers systems that lower costs in places they may not have thought possible.”

Hinshaw puts DC’s fundamental strategy in simple terms.  “Our customers want to be competitive. They want to be successful, and so do we. If they win, we win”. And the way to win, says Hinshaw, is through top-notch commodities management.

In some cases DC’s commodity management service even includes placement of DC employees in customer facilities for short or extended periods. For instance, two DC staffers work exclusively at the Applied Materials plant in Austin, Texas. By the end of the year, DC’s top five customers are expected to have on-site DC staff members.

In 2005 DC opened a branch in Singapore to support their customers’ Asian Operations.  The DC office there, with three managers and an administrative assistant, handles prototyping and processes orders for assembly production done by 15 employees at a 12,000 square-foot facility in nearby Bantam, Indonesia.

The markets in which DC supplies products and services are diverse. DC has 150 customers in such industries as agriculture, construction, industrial manufacturing, medical, nuclear, semiconductor, telecommunications, transportation and underwater.

“We have a broad spectrum of customers to protect us from downturns because all of our segments have them,” Hinshaw said. “We are very strategic with our businesses and the diversification of our portfolio. We are careful not to over-commit because of risk.” No customer represents more than 18 percent of DC’s business.

The largest sector at 34 percent is medical, and the major customers are Varian, Philips Medical and Intuitive Surgical. Contract manufacturing is the second-largest segment at 22 percent, and the main customers are Flextronics, Solectron, Benchmark and Venture.

Ranking third at 20 percent is the scientific and instrumentation sector, whose customers are Trimble, Coherent and Agilent. The semiconductor market, comprising 12 percent, is fourth, with Applied Materials as the major customer.

Eight percent of DC’s business comes from the engineering department, which is staffed by eight engineers and 35 field technicians. In addition to prototyping, they become involved in such projects as on-site repairs, builds and reworks. For some large clients, DC only provides services – no products. Up to 3,000 auto-CAD drawings are produced annually.

“One of our great strengths is engineering and field service,” Hinshaw said, noting that four years ago the engineering department began reporting to him. “OOur engineering department really sets us apart from other companies in the industry.”

After registering $28 million in sales last year, 2007 income is expected to hit $30 million. For 2008, the number is projected to grow by a hefty 20 percent to $36 million. Such a pace would match 2001-06 when sales doubled, largely due to growth in the medical and engineering services segments. Profit goals have been attained annually.

The growth also resulted from what is called drop-in or non-forecasted business at DC. Accommodating such quick-turnaround orders contributes to 30 percent of DC’s total sales.

“Because a lot of our customers have seasonality and 70 percent are forecasted, we can free up our manufacturing floor to build drop-in orders,” Hinshaw said. “One time we filled a drop-in order for 700 fan assemblies in three hours. We don’t even hesitate to accept orders like that anymore. One way to manage a commodity is to keep slack in the line.”

Among the wiring harnesses and cable assemblies, all of them custom for the low volume market, DC makes many types. They include flexible and semi-rigid coax, sub-miniature coax, discrete, circular, high density, IDC and MDR (1 and 2mm), PCMCIA and SCSI (I-III). Some electromechanical assembly is done. DC has a Class 10.000 clean room and electrostatic discharge manufacturing.

The simplest product made by DC is a six-inch wire with a terminal on each end. Conversely, the most complex is a harness that takes 15 hours to build. The longest cable is 500 feet. Cost per item ranges from 40 cents to $8,000.

DC does tooling in a fully equipped CNC machine shop with a Haas mini mill and a Sharp unit that does electrical discharge machining. Injection molding is done on Newbury 30-ton presses. Among the items are overmolds, end connectors, smart cables, Y molds and ferrite molds. The products are made from silicone, Santoprene and PVC in assorted colors, including those in the Pantone spectrum.

Among the pieces of equipment are Schleuniger stripping machines. Planned acquisitions include a bend tester, environmental chambers, salt-spray testing unit and a temperature and humidity chamber.

“We do it all ourselves, which is easier than farming it out,” said Ruben Macias Jr., 37, vice president of operations. “We cannot afford the time to get in line somewhere else because we’ve got to deliver for our customers.”

Products are made in a 32,000-square-foot building by a production staff of 200, including 35 on second shift. Cellular manufacturing is used, so every production employee can do a complete build, including pretesting.

An order may consist of one item or up to 12,000 units annually. More than one million items are produced yearly. Sixty-five percent of them goes out of state, 30 percent is in California and five percent outside the United States.

With an average of 18 pieces per kit, 5,000 kits are shipped monthly. Eight years ago, that number was less than 1,000. Macias attributed the tremendous production gains to implementing Six Sigma, 5S, ISO 9001:2000 and A-620. Employee training is ongoing.

Macias also stressed low turnover, with the average assembler having worked at DC nine years. “They know their jobs, they embrace change, and they grow and keep pace with our customers. There are times when we have to ramp up and drive hard, and our people really can do that. I’m proud to work with them”.

Production also is high due to a working environment described by president Dave Cianciulli Jr. as “honest and open with everyone. Nothing is hidden,” he said. “I don’t want somebody in one department not being successful because of someone in another department. That way the company suffers, and so do our customers.”

The administrative staff consists of 40 people led by Cianciulli, Hinshaw and Macias. They are assisted by managers Leonard Martinez, Quality; Vince Nguyen, Materials; David Tran, Production; Chris Gill, Human Resources and Accounting; and Lou Bottini, Finance. K.A. Chua is the managing director of the Singapore facility, and C.K. Chua is the general manager for Asia.

Everyone at DC is indebted to David Cianciulli Sr. for starting the company in 1979 in a 1,200-square-foot office and warehouse in Sunnyvale, Calif. He was a one-man rep firm selling interconnect devices such as connectors and cables. His mission was to provide high-quality products and customer service.

In 1982, DC became a distributor for 3M products. The transition to manufacturing was made in 1987 when customers persisted in requesting assemblies. As the company grew, different facilities were required, and DC was at two locations in Santa Clara and two others in San Jose, each for three years, before settling into the current building.

Cianciulli Sr., 65, retired 10 years ago, and his son became president. Prior to the position, Cianciulli Jr., 42, worked in telemarketing, customer service and sales.

In his role as president, Cianciulli continues to focus on sales as well as new markets with low volumes and high diversity to fulfill DC’s niche. “ We are different from other companies in two important ways”, says Cianciulli. “First, we can make only one piece if that’s what the customer wants. We are set up to do one-off prototypes as well as large orders. A company making 100,000 pieces a year can’t be satisfying orders that require a five-piece prototype build. DC does a tremendous amount of that. Second, we don’t approach business like we are at war.  We look for strategic partnerships and alliances with other cable assembly companies. We look at what makes the most sense in the long term, not just what will make us the most money in the short term.”

Cianciulli underscores that point by adding, “I do not have a problem investing in a customer if it shows promise as a long-term partner.  If we have to wait a year to see some payback,” says Cianciulli, “ I’m okay with that."<a href="http://www.dcelectronics.com ">Custom Electronics Cable Assembly</a>

About the Author

David Bernard is the founder of Mythmaker Creative services. Mythmaker creates corporate identities and message strategies for companies ranging from high tech to natural foods. Custom Electronics Cable Assembly

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