The paper was presented at the Polish Logistics Congress “Logistics 2004 – Logistics networks in the integrated European market”. Poznań, May 19-21, 2004.
Introduction
Many people are unaware of the fact that a large portion of consumer and industrial electronics equipment is no longer manufactured by original equipment manufacturers (OEMs), but their production is subcontracted to electronic manufacturing services (EMS) companies.
In the nineties, this sector was described quite pejoratively as a “stuffing shop” or neutrally as contract manufacturers. The production of the EMS sector was basically limited to manual or automatic assembly of printed circuit boards, which were then subcontracted to OEM companies. It can therefore be said that it was a rather short supply chain. Flextronics is a representative of the EMS sector with branches all over the world. In 1993, Flextronics CEO Michael Marks founded the company in Singapore. With a modest turnover of 100 million dollars and 22nd place in the EMS sector, Michael Marks set himself a goal – one billion dollars in 1998 – and he achieved it. Flextronics expanded its operations at a staggering pace, reaching a turnover of 4.5 billion dollars in 2000. When the entire electronics sector was in crisis, Flextronics continued to grow, becoming the market leader in the EMS branch in 2002. The previous fiscal year was closed with a turnover of 14.5 billion dollars with the best working capital turnover (16 days) and inventory turnover ratio (12 days) in the sector.
Where does the key to success lie? Many people ask Michael Marks what his plan was when he bought land in Guadalajara in 1995 and built a factory on it. The EMS sector grew by taking over the production capacity of the OEM sector, which wanted to outsource it. The idea was therefore to build an industrial park from scratch, which became the basis for the great success of Flextronics.
Today, Flextronics has 6 industrial parks built in Mexico, Brazil, China, Poland, and Hungary. These parks support not only Flextronics production plants, but suppliers can also rent space and buildings in them. The parks brought savings of 1-4%, which determined the final success of the company. In the industrial parks, Flextronics produces many low-margin products as well as products such as X-Boxes (Microsoft), Hewlett-Packard printers, and several mobile phone models. In recognition of Michael Marks’ success, “Electronic Business” magazine honored him with the title of CEO of the Year.
Behind the curtain – Flextronics Hungary
The original activity of the Hungarian branch was limited to manual assembly of printed circuit boards and the production of plastic parts (housings and front panels for consumer electronics). As the technology grew, so did the complexity of the assembled products, such as: plastic parts for VCRs, cameras, and electronics for CD drives, etc. Around 1997, there were two operating factories in Hungary. The factory in Tab, mainly for the production of audio equipment, and the first Industrial Park in Sarvar in the western part of Hungary. In the industrial park in Sarvar, not only plastics are produced, but also inkjet printers and simple cameras. Companies such as Phycomp, SCA Packaging, and other entities, such as the Dutch carrier Versteijnen, have found their headquarters in the park. In the last years of the 20th century, Flextronics increased its operations in Hungary to such an extent that it was decided to build a new industrial park, this time in Zalaegerszeg, about 60 km from Sarvar. Initially, it was planned that this industrial park would host large-scale assembly of printed circuit boards for various applications (CD drives and burners, phones, palmtops, etc.).
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