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December 2016 • SMT Magazine 33 A NEW ORGANIZATIONAL MODEL USING LOGIC, COST EFFECTIVENESS AND CUSTOMER SERVICE Our Company Let's look at the economic impact of a new organizational model by defining our mythical high-tech EMS company: Chips and DIPs (C&D). One way to classify the size of our company is by its annual sales [2] : Tier 1: greater than $2.0 billion Tier 2: $500 million Tier 3: $100–500 million Tier 4: $30–100 million Tier 5: less than $30 million Material accounts for about $24 million, or 80% of sales. That leaves $16 million in direct labor, burden (indirect labor, overhead, G&A and profit). Our company, C&D, is a Tier 4 EMS provid- er with annual sales of about $75 million USD. It is a low-volume, high-mix product portfolio. We have on the average six original product de- veloper (OPD) customers at any time. One of the things that has made contract manufacturing so attractive to a product devel- oper is cost. Most OPDs have concluded that it is in their best interest to off-load the produc- tion of their products to a contract manufactur- er (EMS). This enables them to defray the cap- ital and labor costs they would incur by doing their own assembly. Everything else being equal, this is largely un- true. However, in many cases it becomes the right decision for the wrong reasons. The logic used is similar to the decision an ODP makes to produce products remotely, using a source with low labor rates—also, generally wrong [3] . But, I digress— we'll save these subjects for future columns. The EMS industry is incredibly competitive. I liken it to a supermarket: Store's margins are very, very slim. The store makes very little when it sells one can of peas, so to make a reasonable total profit it must sell lots of cans of peas. C&D's Organizational Model As a business unit, we at C&D had the choice of several standard hierarchal organizational models to choose from. All of them collected per- sonnel with common and similar skill sets into departments. Each department has a manager . Some departments have group leaders and sec- tion heads. We have directors who lead groups of departments or have an area of specialized skill and responsibility. Finally, at the apex of the pyr- amid we have a CEO—the head of the fish [4] . We want to give our customer the feeling that their products get personal attention. So we form product teams by matrixing in personnel from different departments to form a program team. Each member of the team still reports to, and is reviewed by their department manager, but has specific program responsibilities as well. The program manger had dotted line superviso- ry authority over the team member. The Labor Skills We Need at C&D This is a partial list of the job skills and tasks that we had to fill and fit into our organization chart for both direct and indirect labor: • Production planners • Industrial engineers • Automation engineers • Electrical test engineers • Personnel to load customer bills of material into MRP • Procurement people to generate material quotes for sales & marketing • Master scheduler and planners who plan and release work orders to production • Program managers • Material handlers (in-shipping, material inspectors, pack and ship) • Inventory and stock room personnel • Process engineers who develop assembly processes and generate ops sheets • Kitting people who pull and kit material for released work orders • People who deliver the kits to the appropriate equipment and work stations • People who program stencil printers • People who set up the stencil printers • People who operate the stencil printers • People who program the component placement equipment • People to load tape and reel feeders and set up component placement equipment • Component placement equipment operators • Process people to develop reflow oven profiles