EMS@C-LEVEL
As Forbes, Entrepreneur, Fast Company and SCOOP writer, Philip Stoten, continues to talk to EMS (Electronic Manufacturing Services) executives he learns more about their individual and collective experiences and their expectations for their own businesses and for the entire electronic manufacturing industry.
EMS@C-LEVEL
Thriving in EMS: Microboard's Growth, Supply Chain Resilience, and Workforce Diversity
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Discover the engine driving Microboard's growth as I, Philip Stoten, sit down with Owner and CEO Nicole Russo at Apex 2024 to share the strategies that have fortified client relationships and spurred innovation. We navigate the complexities of supply chain upheaval, discuss how financial acumen and cutting-edge tech are revolutionizing operations, and reveal how diversity in the workforce—bolstered by automation and upskilling—strengthens the backbone of Microboard's expansion.
Hear how strategic foresight and selective partnerships have kept Microboard's sails full in the choppy waters of the EMS sector. We dissect their commitment to sectors like defense, medical, and telecom, and how these shield them from the industry's inventory bubbles. Hear first-hand from Nicole about the impact of global events on the demand for defense products, and how incidents, like the one involving Damar Hamlin, surge interests in markets such as AEDs.
This episode, filmed on location at APEX24, offers a deep dive into the symbiosis of OEM relationships and Microboard's future-directed vision for growth.
EMS@C-Level is hosted by global inspection leaders Koh Young (https://www.kohyoung.com) and Global Electronics Association (https://www.electronics.org)
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Hello, I'm Philip Stoughton. I am on the Koyang booth at Apex 2024 and I'm joined by Nicole Russo from Microboard. Nicole, great to see you again. Last time we talked it was over Zoom, so great to do it in person. Thanks for stopping by. I just wanted to get an update from I think we spoke like maybe two years ago, from where you were then to where you are now. Last year seems to have been a really good year for the US for EMS companies. We've seen some reshoring trends, but we've seen some real growth in the market. What's it been like for Microboard?
Speaker 2Yeah, so great to be here, phil. Thank you for the time. We are growing significantly. We've seen the steadiness of the supply chain. Emerging Customer backlogs are still strong. I think there's some discussion of are they real? Will they tailor down at some point? We're not seeing that. We're seeing that they continue to be very strong. A number of our customers coming out of COVID have wanted to engage in master purchase agreements or LTAs, that really then further solidify the next at least two to three years of business through those arrangements. So we're very, very encouraged right now.
Speaker 1Yeah, and I think what's fascinating is, as we went through that COVID period, we identified quite a lot of fragilities in the supply chain and I think, much as it was a challenge in time for relationships between EMSs and their suppliers, emss seem to have done a really good job of communicating well with their customers and actually perhaps improving that relationship, that strategic bond that's there. Is that something you found as you went through? All those supply chain struggles actually brought you and your customers closer together, even though you were having to tell them there was scheduling issues?
Speaker 2Absolutely. I mean we made recommendations on how to secure long lead parts upfront funding if they wanted to support that and they listened and they continue to listen. What we hear over and over is nobody wants to be blindsided and we really don't understand where the lead times are. We believe some pockets are stable, other pockets memory and things we're not quite sure. So customers are still leaning into long lead parts and getting things on order much further. You know CM world's 90 to 120 day visibility. The two to three year visibility we have right now is just stellar for our industry.
Speaker 1And that's stellar for you as a business manager, for planning and for all those things. Just on the inventory side, have you managed to reduce some of those stock levels? Is it inventory you're carrying that's paid for by your customers? Has that driven any cash flow issues or is it starting to even out a bit more?
Speaker 2So my background is a vice president distressed debt at GE Capital so I know what a good capital structure looks like, which means we don't get into trouble. We have significant liquidity through a combination of just good inventory management. The turns are not where they should be, but it's good management inventory from milestone payments, a combination of moving out as much inventory as quickly as we can through strategic planning. And then, in some cases, maybe where we're buying parts from our customers, maybe there's credits that they're willing to let us keep while we work down some of their backlog of inventory if they've had a push-out or something. So there's all kinds of scenarios to work with your customers on and I think people have to not be afraid to do that. Yeah, Because it keeps you out of trouble and it allows us the growth capital we need so we can invest at this show, come out here and get some new equipment and make sure our customers are satisfied for the years ahead.
Speaker 1Yeah, and it's that equipment that helps you to perform at the level you perform at, and that's part of what I'm seeing in terms of building on. That reshoring trend is a real focus on operational excellence, on making sure that you've really got the factory performing well and you're really getting as much as you can out of that capital equipment. Is that something you've focused on over the last year or two?
Speaker 2Absolutely so. One there's a lot of automation here, everything from final inspection to just how data platforms can talk to each other to give you real-time intelligence. Two, the ability to upskill our workforce and pay them more by automating more we have to do we have an obligation to do that to ensure they're getting ahead. So we are heavily investing in that. We're going to take a holistic view of our entire system IT-wise and just rip it apart for lack of a better term in the next 18 to 24 months and recreate what it's going to mean as AI is emerging. You know and that's a big word and there's still not a lot of really good use cases that have been established yet, but we're going to be ready for it and we know that's part of our success.
Speaker 1Yeah, and when you look at that upskilling and you look at that automation and even the adoption of AI, is that something that is going to help you mitigate the talent shortages that most US manufacturers are seeing at the moment?
Speaker 2Yeah, it's such a loaded area right now and I've been telling people the complaint of workforce challenges has to become the distinct words of how are we going to solve it. This is the workforce we are dealt with and these are the folks that we're either going to get them to come in and join us or we're not. And if we don't get them to join us, we've got to figure out other ways. The automation and the data integrity swing shifts, you know, can we get for us. There's a couple platforms we're working on.
Speaker 2One, women that potentially want to work 9 to 2, you know where their children need that life balance. Two, trying to get close to retirement. Folks staying in longer. Three, the neurodiverse population that we're going to set some programs up in Connecticut to look at. 6% of the workforce in any state in the country is neurodiverse and usually unemployed or underemployed because of lack of confidence. So we're going to pursue those markets as well as veterans. Veterans fall into the category of being nervous to come in for jobs. So all of those coupled with automation and data, we should be able to solve this. Yeah, absolutely.
Speaker 1Are you able to benchmark and measure your kind of revenue per capita and see how that's grown over the number of years? A lot of people talk about doing more with the same number of people as a key part of the growth strategy going forward. Is that something you consider and are measuring as you go?
Speaker 2Absolutely. I mean, this industry is so capital intense and we've got to be planning equipment right now for the technology that's five and seven years out. So, as we're making those investments and not adding significant overhead, the hourly workforce is a piece of the puzzle again, overhead, you know the hourly workforce, you know, is a piece of the puzzle, but the overhead of you know what our staff can do that's more efficient is really where we need to look. And also remote work.
Speaker 2You know I was not a believer of it and there are certain jobs you can't do. You know you can't be a manufacturing person and work from home, but I do believe it's going to become more of our solution. You know that we've got some, you know, staff that can work from home certain days. For that, you know, we have a compensation that may be a little bit less because that's a benefit they'd like, and I think there's different ways, you know. So the return on investment, on the capital, in relation to the headcount stabilizing and the revenue growth is a very important metric, yeah, and looking at diversity in terms of who you recruit, but actually having diverse solutions for all those different people is really valuable.
Speaker 1You talked about the neurodiversity. I think that's a really interesting area and topic, and actually embracing the talents and skills that come with that but actually putting in the structures to support those is going to make you stand out and be unique within a certain area of the workforce. That's something that's really important when you're trying to move the needle in that area.
Speaker 2It really is and you know, as an underserved population, that is brilliant. We need to provide them programs. So I happen to be very blessed to be the executive chairwoman of the Workplace. It's one of the largest workforce boards in the country. We raise about $60 million a year through private, federal and state funding, and we are creating a platform with a partnership with Lockheed and some other entities in Connecticut to go ahead and put wraparound programs in place so that we know how to hire neurodiverse. We know how to deal on their days that they're challenged or days that they're having a good opportunity, and we're going to make it work, and so we're very excited about that opportunity and what we believe is a population that is labeled incorrectly and really needs good opportunities.
Continued Growth and Strategic Partnerships
Speaker 1Yeah, and that's exciting because actually if they're 6% of the workforce, they're 6% of the consumers, so it makes sense that they can be involved in the supply chain throughout that process. One of the trends we've seen, particularly in some of the larger EMS companies as that inventory bubble's gone through, it's ended up as an inventory bubble at their customer and they've seen a softening in demand. You haven't seen that. You've seen good, solid book-to-bill ratios month in, month out. Do you see that continuing? What does it look like in terms of projection?
Speaker 2We haven't. About 45% of our revenue is defense. Now that's not our CCA count because the value add on the defense cards are much more, so our CCA count is only about 30% of the defense. That sector obviously is very strong for many of the world's reasons that are happening. Our other sectors medical, telecom, industrial all have remained relatively strong. In fact our telecom sector is emerging with a whole new product line right now and that's very encouraging to see some of the very strategic partnerships they have for clouds and more local communication and cloud applications.
Speaker 1When you're working in those industries and you're focused on specific industries, does that mean you're gaining industry expertise and you're working perhaps in more than just the manufacturing space? You're involved in the design, you're involved in aftermarket, you're involved in end of life for those products.
Speaker 2Actually, for the telecom sector, we do do direct fulfillment for them, including aftermarket. That's coming back. They actually don't have any manufacturing at all. So they've got 80 engineers around the world. So, yes, we're, we're a direct, you know, touch into their customers, our medical customer, we're full box build integration and for defibrillators and compression devices and other medical applications. So we're not direct shipment but we're, we're definitely understanding and feeling those sectors. And what's going on, demar Hamlin, you know, with the, with the football incident, you know the AED market is very strong and AEDs are relatively easy to buy now, you know and that most sports teams, schools, even families, want to own them.
Speaker 1Now. Yeah, so another interesting market. And I think what I find fundamentally important there is that when you get an OEM that doesn't invest in manufacturing and is prepared to say you know, we're going to partner with Microboard. They know what they're doing, they can manage our supply chain, they can manage our manufacturing, end of product life, reverse logistics you can just deliver so much more value to them.
Speaker 2Absolutely, yeah, and we'll help them with absolute part notification, a little bit of manufacturing design work, but at the end of the day, you know the design. We don't do that heavy lift, obviously, and they're doing that, but we're guiding them continually on backlog discussions. You know long lead parts and it's a really good partnership. Yeah, so you enjoy it.
Speaker 1Good stuff and continued growth. You see the trends that you've seen over the last couple of years continuing over the next few years and it sounds like you have more visibility now than you've ever had in the past.
Speaker 2We do. I mean, the trajectory for electronics obviously is just such a curve, and I think for us, the defense sector is going to remain one that's strong that obviously has to stay on shore.
Speaker 2We know Mexico has come up a lot with their stability there. We're not there right now, but we do see a core group of customers that's going to allow us. We only have 14 customers right now and we've doubled the business just with those 14, and we're planning on bringing about another five in within the next 18 to 24 months. We could bring in 10 to 15 if I really wanted to. That's not the kind of business we're trying to run, a business that is extremely service-oriented and really uses the staff that we have in Connecticut very selectively. So we believe in a very strong you know, as my BD of sales, he says you're going to 10x this business in the next five years and I believe we could, yeah, and you can do that by being selective with the customers you choose and choose customers that really fit with Microboard and really get value out of Microboard, and that's what really makes the difference.
Speaker 2Absolutely, and the relationship's key. You know you have to be eyeball to eyeball with your counter stakeholder. You know in the relationship and the partnership and what you're going to do for each other. It's really critical in this industry, yeah, absolutely.
Speaker 1Well, great to be eyeball to eyeball with you. Finally, after doing these previously in Zoom, great to spend some time with you. Thanks so much for talking to me.
Speaker 2Thank you, phil, really appreciate it.