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As circuit boards continue to increase in complexity, the PCB manufacturer-in order to stay alive in an increasingly competitive market-will be forced to produce boards of the highest quality to meet marketplace performance standards. In addition, he will have to produce them economically at a profit. Latest industry trends and competition from Asian manufacturers from China and India have made a considerable blow and caused profit scopes of many UK and US industries to decline, particularly the sub-contract manufacturing firms. These declining profits margins has presented significant incentives for the management of all costs within a company, in this report, referring to Thompson Page Interconnections (TPI), a sub-contract manufacturer of printed circuit boards (PCB).
Posing a question to myself "can the PCB industry in the UK endure the assault from Asian companies, particularly from low-cost manufacturers from China?" Based on reports from leading professionals of UK based PCB manufacturers, it seems that there is still hope for survival and even prosperity. But, this would only be achievable at a cost that manufacturers must be prepared to take. They must take a look at the strategies of conducting their businesses in particular, and the management of their cost structures. Consequently, TPI introduced the Activity Based Costing (ABC) technique in order to develop its tendering process for new contracts and cost management by collecting data on manufacturing times and costs involved.
"Activity based costing (ABC) consigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities."
The idea of this report is to put forward a five year plan based on the result of the strategic analysis done using management tools like SWOT and PEST analysis. PEST considers the external environment as a whole; the SWOT analysis (strengths, weaknesses, opportunities, threats) describes the internal and external influences. Combined together they provide a unique width and depth to the analysis. In this report we shall discuss how information technology can be utilized in order to gain a competitive advantage over rival companies.
2. tactical study
This study includes the level of competition and threats from the environment, rival companies and any breaks that needs to be covered in the market. It is evident that data collection is an essential part of SWOT and PEST analysis. As information collected from this is more factual and accurate, their result would be more realistic and reliable and any solution derived from it would be valuable to the company. The company would be able to understand its internal capabilities as well as the external factors influencing it. The firm also gets a chance to evaluate its external opportunities and threats. Hence in this case, I am using these two analysis tools for the outlining of the 5 year plan. Some of the problems that plague TPI include trouble in identifying difficulties in manufacturing and assembly and inability to assign production costs correctly to individual jobs. These tools also help the company through a realistic evaluation of its own strengths and weaknesses as compared with its rivals. These analyses open up a new dimension of competitive position and could be used in solving the present problems faced by the company.
SWOT analysis is a marketing audit that considers an organization's strengths, weaknesses, opportunities and threats. This tool is used because the fundamental aspect of a SWOT framework makes it easy to determine the societal context of the issue, the organizational context, the dyadic relations, interactions and effects to those involved. SWOT is also used as a situation analysis tool for providing data for the strategic planning process. In fact, SWOT analysis is often used together with planning strategies and becomes one the vital factors for its success. The fundamental aspect of a SWOT framework makes it easy to determine the societal context of the issue, the organizational context, the dyadic relations, interactions and effects to those involved. Clarifying and summarizing any issues and opportunities are facing a business or project is one of the key points of a SWOT analysis. Thus, SWOT analysis plays an important role in business by developing critical strategies and setting up business objectives to achieve a firm's goals. Another benefit of SWOT analysis is that the major expenditure concerned in the analysis would be time and thus helps the business generate new ideas without engaging a marketing team or a business strategist. Thus by understanding the method by which a business is conducted and some available time, anyone can perform a SWOT analysis, thereby saving cost and resources. I shall now discuss the four branches of the SWOT analysis - strengths, weaknesses, opportunities and threats.
One of the largest surface-mount PCB manufacturers.
Possesses advanced technological skills.
Specialist assembly of PCB
Fast-track prototyping and box-build services.
World leading universities research base.
Strong supply chain.
Vast areas of expertise.
Poor information on assembling times and its costs.
Declining market shares.
Highly disparate sector
Limited technology transfer.
Limited collaborative working.
Scope for improvement in tendering process.
Availability of different market sectors
Increasing quality conscious end-user.
Could develop an option for recovering from future disasters.
Rapid response delivering programme.
Exploitation of emerging technologies.
Exploitation of UK infrastructure.
Increase in number of Asian competitors.
Declining profits margin.
Innovation in overseas market.
Outsourcing of supply chain.
Increasing legislation and regulations.
Acquiring accurate information on the costs of parts and sustaining sufficient levels of stock so that it would not run out and yet still, not be overstocked should definitely go a long way in reducing the weakness factor. The above threats should be assessed and the company should be prepared to face these threats at any point of time by taking appropriate measures. Proper management could help in turning opportunities to strength and eliminate the weakness, thereby; the company would have a much better prospect of getting hold of the top position and increasing profits in the PCB manufacturing market.
Organizations should try to understand the broader 'meso-economic' and 'macro-economic' environments in which they function, helping them make decisions and to prepare for the future. (The meso-economic environment is the one in which we operate and have limited influence or impact, the macro-environment includes all factors that influence an organization but are out of its direct control). An organization on its own cannot affect these factors, nor can these factors directly affect the profitability of an organization. But by understanding these environments, it is possible to take the advantage to maximize the opportunities and minimize the threats to the organization. Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long term trends.
A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. PEST factors play an important role in the value creation opportunities of a strategy. However they are usually beyond the control of the corporation and must normally be considered as either threats or opportunities. By making effective use of PEST analysis, the company can go along with the change and thus be successful rather than resisting the change. It also helps in preventing bad decisions to some extent and helps the firm to adapt to the new change.
Over the last 25 years major changes in Government policy, and its underlying rationale, have occurred. The UK has seen a move from the development and implementation of a macro-economic industrial policy that was often tailored to meet the needs of large scale manufacturing industry, to a policy of supporting high technology, high growth businesses; these are typically much smaller and more diverse in nature.
A key element of this transition is the desire of the UK government to raise company R&D expenditure from around 1% of turnover currently to over 3% by 2010. The UK Government's policy on R&D is set out within its 2003 DTI Innovation Report.
This report clearly sets out the need for UK companies to invest in R&D and training if they are to maintain their competitiveness in the global economy. As part of the implementation of the report's proposals, an extensive Technology Foresight activity should be undertaken, to identify potential opportunities for the economy or society from new science and technologies, and to consider how science and technology could address key future challenges for society. Against this backdrop of increasing support for R&D investment and training, the other major change in the political environment is the increasing degree of environmental related legislation. Increasing regulation, from both the EU and UK central government, in relation to the use of hazardous substances has significantly impacted on many PCB manufacturing processes; requiring alternative solutions for traditional fabrication to be found. For example The European Union (EU) Directive on the Restriction of disposal of certain Hazardous Substances, restricts the use of Cadmium (Cd), mercury (Hg), hexavalent chromium (Cr (VI)), lead (Pb). This legislation has had far reaching impact on the UK's PCB industry.
The UK's macro-economic situation has recently seen a notable period of stability; characterised by stable economic growth in the economy as a whole of typically 2.0-3.5%. However, this macro-economic picture does not represent the trends within the manufacturing sector. Generally the sector has underperformed the wider economy, and the performance of industry sub-sectors has varied markedly due to sector specific factors, such as the impact of 9/11 on the aerospace sector and the impact of Chinese demand on the commodity markets.
Across the manufacturing sector the emergence of the low cost economies as significant market players has had a major impact on the industry. The readiness, and arguably necessity, of the original equipment manufacturers (OEM's) to source globally, to take advantage of the low labour and material costs in the developing economies, has created a highly competitive market place. It is also evident that the technical complexity and quality standards within the emerging economies are rising rapidly and that the assumption that these economies would only be able to compete in low value high volume businesses is increasingly difficult to sustain. The implication of this is that UK companies will need to demonstrate clear product differentiation or regional benefit if they are to maintain their competitive position.
This position is exacerbated in some sections of the PCB manufacturing industry, where there is a high concentration of customers in a particular area (such as the computer industry) with highly competitive markets.
The major socio-cultural impact on the industry is the globalisation of world markets as a result of the emergence of the low cost economies and the relatively low transportation costs for manufactured goods. Increasing competition has resulted in a change in purchasing policy in the UK away from long-term local agreements to open tendering processes, where the lowest cost supplier who is able to meet the quality and delivery requirements is selected. In many cases the OEMs actively co-operate with businesses in the emergent economies to ensure that they are able to meet the quality and delivery requirements.
Nevertheless, local sourcing does continue within the industry, driven by a range of factors, including: company and personal relationships; transportation costs; turnaround times; trust; common culture; technical competency; and of course price. The importance of these elements, even in a global market, cannot be completely discounted and still have an important role in the market place.
Historically, the desire to "Buy British" has had some, albeit limited, currency within the market place. However, given the market factors now in play this factor can largely be discounted within business to business transactions, and can increasingly be discounted in business to consumer transactions.
The PCB manufacturing industry in the UK has a wealth of technical resources at its disposal. This expertise is contained within both the academic science base, the research base and within industry. This has resulted in an industry that has continued to innovate and has maintained its ability to bring leading edge products to market. This high technology base has been sustained in spite of the migration and consolidation of significant sections of the supply chain outside of the UK. The retention of this high technology PCB fabricating capability within the UK is predominantly due to the presence of a range of prime end-users within the UK, who continue to require UK based support in the production of their components and systems.
The retention of a high technology R&D infrastructure within the UK is entirely consistent with the current UK science policy, noted above, and several UK government initiatives have been undertaken to further stimulate technology transfer and the dissemination of best practises.
3. Five Year Plan
A practical business plan is a distressing and a very crucial exercise. This planning process makes the management realise what they want to achieve, and how and when they can do it. A 5-year strategic business plan helps the company stay organized and meets the necessary goals to stay commercial. A well-thought-out strategic plan can increase sales, increase customer awareness and increase the reputation of any business, but requires time and effort to be properly executed. While preparing a strategic plan, it's important to decide in which direction the business should go and what it will take to get there. We will also need to consider internal operational and procedural changes when creating a plan.
To facilitate the creation of a 5 year plan, we need a company mission or vision statement. TPI's mission statement is 'to improve its position in the sub-contract manufacturing market by producing a quality product at a competitive price' has already been existing, yet not fully realized.
Strategies for the next 5 years
The five year plan is based on the mission statement and the strategic analysis of the company's strengths and weaknesses, as well as the internal and external factors affecting it. The internal factors may be adjusted in order to suit the strategy plan, since the organization has restricted control over the external factors affecting it. Five sets of strategies and respective action items have been developed as outcomes of this Strategic Business Plan.
Augment the company's abilities to implement full potential in the procurements of tenders for a new contract.
Expand the technical resources so as to gain manufacturing advantage.
Enhance the effectiveness of the management through basic operational improvements.
Improving and upgrading the organizational structure and capabilities of the employees.
Improving shop floor structure of TPI in order to reduce processing times and costs.
Update the consumer requirements and current market demands.
Plan of Action
Strategy: Augment the company's abilities to exercise full capabilities in the procurements of tenders for a new contract.
Assign production costs accurately to individual jobs.
Identify production difficulties related to specific batches.
Strategy: Develop Technical resources in order to gain manufacturing advantage.
Employing a CNC "pick & place" machine at the Andover site in emergency cases when the machinery at the main site fails.
Use of computer aided PCB manufacturing software in order to increase yield rates during manufacturing and resolve any potential problems prior to PCB manufacture.
Improve technical capability by investing in the latest state of the art equipment.
Strategy: Increase the effectives of the management through basic operational improvements.
Monthly management meetings should change to bi-monthly.
The management should annually evaluate the company's performance and reset annual objectives and goals.
New management members should receive training.
Enhance information flow between management and staff through quarterly reports and periodic journals.
Strategy: Improve and upgrade the organizational structure and competence of staff
Execute an evaluation of the internal organizational structure of the present staff.
Review and revise (as needed) current job descriptions of the staff and whether they match accordingly.
Increase or downsize the staff to fully implement strategic business plan.
Strategy: Improve shop floor structure to reduce costs and processing times
Shop floor plan developed according to present market situation with scope left for future improvements.
It should be clear and in a sequential manner.
Any difficulties should be avoided in determining production times and costs (Activity Based Costing).
Fully computerization of the shop floor with and standards provided to each component of the shop floor.
Strategy: update consumer requirements and current market demands
Update often to stay ahead of competitors.
Regular analysis to be made on market demands for the improvement in market levels of the firms.
4. Use Case Diagram, Class Diagram & Activity Diagram
Use Case Diagram
Use Case Diagram
In the above Use Case diagram, the PC does the job of recording time taken for the entire operation to complete and calculating the costs incurred for that operation in lieu of a human worker. Hence, I have assumed the PC as an active actor in the above Use Case diagram. The above use case diagram shows the functional requirements needed for the trend analysis of the manufacturing cost and times for a single product.
A class diagram in the Unified Modeling Language (UML) is a type of static structure diagram that describes the structure of a system by showing the system's classes, their attributes, and the relationships between the classes.
Activity diagrams portray the working behaviour of a system. The diagrams describe the state of activities by showing the sequence of activities performed.
5. New System Architecture
The firm is located at two different locations, the main branch which is at Walton and the specialist PCB manufacturing branch at Andover. Most of the top management executives and other departments like sales, design, Research and development are located at the main branch.
As seen from the above figure, a single file server acts as the hub for all the networking computers. The file server stores the application software and the database necessary for the manufacture of printed circuit boards. All the terminals from the shop floor in both the branches are connected to a secured workstation terminal, for data transmission to and from the main file server. The file server is connected to a web server for connection to the internet. A change should be noted that the secured workstations in both the branches also contain the necessary software and the database on them, so that the manufacturing process can be continued uninterrupted in case of a network failure. Apart from that, workstations from other departments like R&D, design and Supplies are also connected to the central server. The two branches are connected via a communications server, acting as the hub.
Security is provided by a strong and reliable firewall and each terminal would be provided with anti-hacking software to prevent intruders or data theft. Apart from these, industry specific and top anti-virus/anti-malware software would be installed with latest updates defined.
It is imperative that the current PCB manufacturers accept the transformational change that took place and still continues in the international bazaar, and also paying attention to the means of conducting international business. More importantly, British companies should ask themselves why many EMS and OEM companies buy goods (in this case PCBs) from Asian countries like China. A simple answer to this question is "cost". Electronic companies are forced to reduce their overall costs in order to survive in this competitive global market. EMS and OEM companies from UK have addressed this issue over the last few years, by shifting all their purchase of components and high volume electronic assemblies to China, mainly because of its low centre of cost in the entire world.
To help overcome the threat from offshore PCB suppliers, many UK companies need to establish partnerships with Chinese and other Asian countries in order to meet the high demand from their customers. This type of joint venture lets UK firms to compete in the global market by offering a guaranteed and full quality PCB services to their customers i.e. from prototypes to volume production. Several companies have already started taken this path, for example. With the PCB market now needing to change and reestablish itself in order to scramble out of the depression, we would optimistically see a return of the vendors market, and well-built alliance between the customer and the supplier will again be a means of securing the necessary competence. This kind of anticipation has already provided to alleviate the cost of PCBs, and for a few customers they are already seeing some small increases. Today's global market is continually changing, necessitating the need to be vigilant in the way trade is performed. It would be very useful for companies to be ready to allow or accept any changes as and when the market states and should be made compulsory.