Nortel moves manufacturing to reduce cost
By Purchasing Staff -- Purchasing, 6/30/2005 2:00:00 AM
Most major OEMs outsource manufacturing to electronics manufacturing service providers in low-cost areas to take advantage of low labor rates.
However, at Nortel Networks, it’s not enough for an EMS provider to be located in a low cost area. Nortel chooses its EMS providers based on their ability to move manufacturing to a certain area of the world as necessary.
"As the market moves around and you have to look at customs and duties and make sure you can move production around at the same time," says John Haydon, vice president of global supply management.
Nortel, based in Brampton, Ont., uses EMS providers in eastern Europe, Mexico and China and will move manufacturing round as necessary for cost reason.
"Now, India is opening up. They have outstanding capability for software and it is a growing place for hardware. You will see EMS industry move into India in a bigger way," he says.
To support global production as it moves around, Nortel has set up a supply chain center in Shanghai and plans to open several others in different regions. "We will have one in Mexico and eastern Europe and India," says Haydon. "What these offices do is allow us to be closer to our suppliers who are in these areas."
The offices will also monitor the developing supply bases in those regions. "We are continuing looking out in the marketplace looking for high quality suppliers to work with," says Haydon. "Each day there is opportunity in India and China. Not as much in eastern Europe and Mexico, but I think over time you will see the supply chain get established in those regions."
Haydon says the supply chain offices are somewhat similar to international procurement offices (IPOs) because they will help to identify new suppliers. But the offices do other things like check out a supplier’s quality and work with suppliers to set up a supply chain architecture to support the manufacturing of Nortel products.
While the supply chain offices help Nortel identify emerging sources of supply and monitor a supplier’s quality, Nortel will also rely on its outsourcing partners to handle much of the sourcing of lower value production components and materials.
"We have a solid belief that we have to give more and more responsibility to the EMS industry," says Haydon.
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