Electronics Production | April 12, 2005
Keys to lower production costs except labor rates
According to www.purchasing.com there is more to look at except the lower labor costs when reducing the production costs. Celestica's lower prices are related to other actions than just lowering the labor costs in the hunt for reducing the total costs.
Celestica is optimizing the supply base and cooperates only with key suppliers to provide the lowest cost solution to it's customers. The location of the suppliers is important to keep the turnaround time at lowest level. Celestica is building large production campuses which also houses a number of suppliers and distributors. "Suppliers position inventory for us or they guarantee a turnaround time of 24 hours," says John Boucher, chief supply chain and procurement officer for Celestica. "They may have it onsite or close to the site, but that 24-hour turnaround time [needs] to be fulfilled." One strategy Celestica has is to reduce even it's suppliers costs. "I don't want to increase cost for suppliers. I want to develop a strategy that reduces cost across the supply chain—not just for Celestica—because if I do [increase their costs], it drives their costs up and I'm going to get it back in price," says Boucher. Celestica also priors strong relationships with it's suppliers. With it's suppliers at the megacampuses the suppliers capabilities can be used more efficiently. In addition buying components from distributors and not directly from manufacturers can offer lower total costs since the distributors may provide additional services such as auto replenishment programs and design expertise that reduces cost.