If you've wondered why reshoring isn't quite hitting the marks we all anticipated, this engaging discussion with special guests, Michael Velmenden from CMS Electronics and Michael Knöferle from BMK Group, is for you. We delve into the inflexibility and opacity of today's supply chains, spotlighting the hurdles faced by EMS companies in maintaining a firm grip on inventory and cash flows. The panelists suggest a call to arms for fairer lead times and an equitable landscape for all supply chain stakeholders.
What is more, the talent crisis in the EMS industry is a real and present danger to reshoring. In the second part of this panel, we place the spotlight on the need to make EMS an attractive sector for future leaders. It's time to bring out the best of this industry - innovative, dynamic, and full of opportunity. And it's not all about drawing in fresh faces. We go on to discuss the intricate interaction between automation and the human touch in the production process.
We explore the path to efficiency and success in the EMS industry. Perhaps it is a resilient supply chain, trust between partners, and a team of skilled individuals complemented by digital transformation and adaptable automation.
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
If you've wondered why reshoring isn't quite hitting the marks we all anticipated, this engaging discussion with special guests, Michael Velmenden from CMS Electronics and Michael Knöferle from BMK Group, is for you. We delve into the inflexibility and opacity of today's supply chains, spotlighting the hurdles faced by EMS companies in maintaining a firm grip on inventory and cash flows. The panelists suggest a call to arms for fairer lead times and an equitable landscape for all supply chain stakeholders.
What is more, the talent crisis in the EMS industry is a real and present danger to reshoring. In the second part of this panel, we place the spotlight on the need to make EMS an attractive sector for future leaders. It's time to bring out the best of this industry - innovative, dynamic, and full of opportunity. And it's not all about drawing in fresh faces. We go on to discuss the intricate interaction between automation and the human touch in the production process.
We explore the path to efficiency and success in the EMS industry. Perhaps it is a resilient supply chain, trust between partners, and a team of skilled individuals complemented by digital transformation and adaptable automation.
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Hello and welcome to the Michael Philip Michael show, or scoop, at Productronica 2023. I'm joined by Michael from CMS and Michael from BMK. Thanks for joining me, guys. I just really wanted to dig a little bit into some of the mega trends we're seeing here in Europe. We're hearing a lot about reshoring I want to find out if that's actually the case and you're actually seeing some benefit there and we're also hearing about talent shortages and the inventory bump coming through the supply chain. Those are the three topics I want to deal with. Michael, perhaps I can start with you and we can talk a little bit about reshoring. Are you seeing a reshoring trend? Do you see jobs come back from Asia or are you seeing less jobs going to Asia?
Speaker 2:I think to figure it out. It's more like to say it's slow down if jobs are going to Asia. Really, really shoring, we don't see so much. It was a little bit the case when COVID started, people were thinking about their security check, but then after a while, when it becomes more and more common to the people, they started again. But reshoring I see, not for Europe, but what I see there is a reshoring or at least a new transfer to Southeast Asia.
Speaker 2:This is something I can see. It's out of China, yes, but not a real reshoring. But what I can really admit is that we have more stable businesses in Europe. We are not having so many discussion with customers moving out of Europe just because lot size is becoming bigger. They are staying with us.
Speaker 1:I think that's a good answer. Yeah, that's a good news, michael. What do you say?
Speaker 3:Sort of same trend, as Michael said. I guess a lot of companies approached us during COVID and they promised us okay, now that's time for reshoring to Europe. And we did a lot of quotations with some customers and in fact nothing happened. Of course, to secure supply chain, there is a move out of China, but still a lot of PCBs are being assembled in China.
Speaker 1:And do you think security was the main reason they were looking at it and they were? Covid kind of shook them a little bit and now they are kind of a little bit more resolved on that.
Speaker 2:So they are less concerned, I think, security, many of them saying it's because of security reasons. I think it's most uncertainty. They were uncertain what will happen in the future and they tried to keep the cards in the game. So, looking forward what can be done in the future, what I see, especially with new products, and I see the trends like digitalization. I see the trends in terms of environment discussions. In Europe, people are more concentrating than on European suppliers. That's what it is, and I think this is much more of importance, because it's not very beneficial to fight with existing borders. It's more of interest to get the new business on board and that's something which is beneficial for us.
Speaker 1:I think it's interesting to think of one getting the new business on board and the environmental impact, the whole ESG side of that, but also to see as we scale business. When it gets to a certain volume it doesn't immediately get shifted overseas. Michael, we kind of moved from this just in time to just in case strategy with a lot of people and I don't know if that's still permanent. I know it was last year and maybe the year before. How are you seeing customers thinking now? Are they more cautious, or are they trying to get back to a kind of a tighter, more dynamic supply chain?
Speaker 3:We are facing the issue that the supply chain is not transparent anymore, even less than few years ago, and it's not flexible anymore. It has been flexible many years ago and you know you just place an order and you can be sure that it's been delivered on time and you can do the production and you can do the billing. But that's uncertain times and you have the non-cancible, non-returnable issue, which is the industry needed to learn about that, and so these are things which makes us think about what we can do to discuss to our customers or to the manufacturers and distributors, and there's no safety stock anymore. So everything, let's say it's a different kind of approach to the supply chain and the customer needs to or our customer as an EMS company needs to understand what kind of things we are facing right now. But I think the understanding is from our customer side is there?
Speaker 1:Yeah, it's clearly there. So that brings us onto the inventory issue, and that inventory was kind of constrained at the manufacturing side. It's forced huge growth in inventory within the EMS companies. Now there seems to be a bit of an inventory gap at some of the OEMs as well. How do you see that working its way through the supply chain? And obviously it has an impact on the way you run your business and your cash flow.
Speaker 2:I think the points you made are very clear. We are fighting with the cash flow that's through because of the long lead times and the inventories we have to keep because of the huge orders which are placed with us, but the demand is now going down. That's one aspect, but the most, much more important from our point of view, is we have to figure out what is a fair lead time for the market which is fair for all partners, because we have to put the materials through the supply chain. And what happened from my point of view in this moment in time? That they are not playing on the same unfair playing field, because what happened in the past is the suppliers as well as the distributors try to save their benefits as much as possible. They increased lead times and usually, if you see the actual situation, lead times must drop down dramatically. This doesn't happen. So what we don't want to have is we don't want to have an unfair approach Now to the supplier side. What we need is a real fair level which can be kept, especially to keep in the future A certain level of stock in the supply chain and be able to finance this for everyone.
Speaker 2:What we are facing now is nearly impossible. Still today we have material in order for the next one and a half year which is absolutely same. It's absolutely impossible and I think the supply especially since the suppliers and the distributors must help us to keep this on a fair level which is beneficial for both parties. And I think it's possible. I'm pretty much convinced it's possible because if not, we will face the same what we see now in the next half year again we will have a shortage. Then we will have a ramp up, shortage, ramp up and it will take too much time and cost for everyone too much money.
Speaker 1:Now, michael, do you think this is a classic ball whip effect or do you think there's more to it? Do you see the end of that ball whip and the smoothing out, or do we still have a lot of work to do in terms of collaboration and communication up and down supply chain?
Speaker 3:Just came into my mind. It's the classical ball whip effect and I think it needs a lot of communication between all parties, and what we are experiencing right now is that the demand is going down from the market, so I think the inventory level will, let's say, balance out in a way, but still we from our customer side or project side, as Michael said, it's up and down and that's the classical effect, which is not very good to handle. Even with fully automated production, it's not a good effect that we need to face and I think there's a lot of work to do. There's a lot of integration things to do and, most of all, still there needed to be a transparent supply chain connecting systems together. It's not done by hand anymore, which is sometimes even still with some manufacturers or distributors, and we need to change this to have this kind of a good work and it's interesting what you say, because with a ball whip it levels out, but if there's further disruption it starts to move again.
Speaker 1:So we're challenged by constant disruptions in the market.
Speaker 2:I think Michael made a good point. On one hand, he installed bit systems which are intelligent enough to handle this stuff, but reality is, because of this situation, we are coming back to the market, to the people, and they have to balance out these things. So we are depending on people and not on the systems, and because of that we will not be able to come to a real good, efficient supply chain again.
Speaker 1:Yeah, we can only have the efficiency of the supply chain as of the right date.
Speaker 2:And to be able to do this, we need as to I think you said it we need a real trust level and the supply chain. Again, we must trust each other and not fight each other. As long we are fighting each other, trying to make money out of everything, it won't be possible to balance this.
Speaker 1:We've got to accept that everybody in the supply chain is entitled to make a profit and we have to be practical about that. As we look at this and as we look over the last few years, we've had some really nice growth in Europe. It's been quite substantial. One of the issues we're getting is a tightening market for talent. There's a talent issue not just here. That's definitely the case in the US and other regions as well. Is that challenging your business and is that something that you are able to mitigate through different means?
Speaker 3:Yes, of course, there's a talent shortage in many different industries. I think, as an EMS company, we need to make sure that the awareness of our job, what we do, of our work, which we do, is very important for the daily life, for the general industry. Now, due to the chip crisis, there's one positive effect Suddenly, everybody knows about what is electronics. What is a chip? It's nothing to eat, it's something that can calculate and can do something, and that's a very important thing. Daily life or even an operation can be stopped because of some broken device or some missing surgery device, because there's no chip anymore. But we are, or what we need to do as an EMS company. We are in industries which are very innovative, which are challenging, which are very highly interested and which are the trends for tomorrow, and that's very attractive for talents to work in, instead of working with an OEM with one specific product and being a small screw in the whole product. So in an EMS company, you can change the world, yeah.
Speaker 1:Michael, how do you see talent in regions you're working in?
Speaker 2:I think I just, First of all, I agree with the points he made and, to put it in one nutshell, is quite simple we, as EMS companies, have to sell ourselves much more better. That's the key, because we are competing with other companies. We are a service-level company, so we do services on one hand, but for the services we need very high-qualified people. We have many different technology areas, either in the process technology, either in development, design. So what we must show in the market that we are a real effective employer that's the most important thing that we really are able to be a very good employer for the people. They can learn many things working for an EMS company. It's worthful and we have to show EMS is not something like a Cray Elephant, it's really a sexy business and that's what it is. That's what we need. Yeah, how do we make it seem?
Speaker 1:sexy.
Speaker 2:Because it will be in the future the same as today. It will be even harder to get very high-qualified people on board. For example, what we did, because in the neighborhood it was a huge company so we were not able to compete. So we really really created our development office in Vienna, close nearby to the technical university, to show and give the people a better working environment and be able to get the people directly from the university. So CISA seems as well. You must change the way of working.
Speaker 1:You've got to consider that Reaching out to academia is really important, but actually to say the talent isn't available where we are, let's go where the talent is. That's another part of it as well. The last part of the talent equation I want to consider is do you see the ability to grow your business with your current headcount through perhaps more investment in automation, greater digital transformation, or are those things not running in parallel at the moment?
Speaker 3:It's more in parallel, because I think of course we need people to do the R&D for automation, to use KI in a useful way and to lead high-qualified people. I think we are in a business where we are not just mass production in high numbers per year or lot sizes, so we are more like the mixed business or mixed volume, and this does not make it happen we can do all fully automated. Our challenge is to produce, at 2 am in the morning, high complex electronics with 100% functionality. So sometimes it's not possible to do this automation. So you need both. You need to have the high mix automated in a way you can pay for it, because in the end you need to pay for it. It's an investment and as well to have still people working in the town. What do you think?
Speaker 2:Yeah, I was really thinking how can this be done? But you should take into account that usually we need always a huge number of high-qualified people. So the low working level which was the case in the past, just mounting some components, it's gone. So for each single item, for each single order, you need the right process and the right place. So you need qualified people. So what will happen without people?
Speaker 2:You can't do this, especially not without qualified people, and automation took place in the past, it will be there in the future as well, but it will not solve the problem of qualified people. You need more and more people who are able to manage the process. Even if you see the just trained operators, they are more and more qualified. We put a lot of effort to qualify them for future shops and if you lose them, you can't replace them immediately. It's not so easy. You cannot say hey, going on the street and get another one on board. Just for example, we Karmaladic today at least six months training time. They have the right level in place to be able to fill the orders which we have.
Speaker 2:So, taking this into account, you can see it's not just a high-end fire. We have to keep the people on board, we have to look forward to get people which are able and capable to be trained, and that's what it is. So, overall, you cannot overcome it just with automation.
Speaker 1:No, it's part of the equation. So, guys, thanks very much for talking to me. Keep doing what you're doing, keep recruiting people, keep promoting the industry. Stay sexy. Keep telling people how it was important, as you can work on projects that are going into space.
Speaker 2:Maybe as an example. I'm not really sexy, but maybe we can get someone else.
Speaker 1:Thanks so much for your time Pleasure to chat here, let's talk again soon. It was a pleasure, thank you.