Raymarine

Source: Manufacturing Digital

Date :26/10/2007 16:34:21

Raymarine’s Operations Director John Spottiswood tells Exec UK how he managed the challenging movement of the company’s manufacturing and supplier base from the UK to Hungary.

Raymarine’s Operations Director John Spottiswood tells Exec UK how he managed the challenging movement of the company’s manufacturing and supplier base from the UK to Hungary

Written by James Hurley & Produced by Ben Weaver

Moving a manufacturing base to a low-cost region is an extremely challenging transition for any company, but it’s now such a common occurrence that it hardly warrants widespread attention. However, the vast majority of outsourced activity involves low-mix, high-volume manufacturing of products such as consumer electronics. High-mix, low-volume is another matter entirely, and many have suggested that the low-cost option is simply not viable here. Raymarine has emphatically shown that this simply isn’t the case.

A quantum leap

Raymarine is the world leader in marine electronics. It develops and manufactures a comprehensive range of electronic equipment for the recreational boating and light commercial marine markets. The Raymarine product lines include radar, autopilots, GPS, chartplotters, instruments, fishfinders, communications and software and systems.

In 2005, the company entered into a five-year outsourcing relationship with leading EMS provider Flextronics to outsource both Raymarine’s supplier base and its manufacturing activity from Portsmouth to Zala in Hungary.

Operations Director John Spottiswood was brought on board by CEO Malcolm Miller to manage this remarkable transition. “My relationship with manufacturing basically involves outsourcing the supply base i.e. removing a local and expensive supply base and moving to low cost which normally means Asia, the Far East, or Eastern Europe.”

Spottiswood had previously worked with Miller at Pace Micro Technology, a manufacturer of cable boxes, where he was also Operations Director. While he oversaw the closure of Pace’s factory in Bradford and outsourcing to Romania, he says the challenge at Raymarine was a different one.

“This is low volume, high mix – this is not fast-moving consumer goods. So the outsourcing of this is a quantum leap in difficulty for us and our EMS partner. The EMS world is very comfortable with high volume, low mix, and very comfortable in their ability to build a million handsets or, in our case five million set-top boxes with only 22 variants,” he explains.

Raymarine, on the other hand, has 250 top-level assembly spares and accessories. “I’ve got 48 separate manufacturing cells, I’ve 180 different printed circuit board assemblies and they have to do multiple line changes every day, so this is the ultimate test for an EMS company and it’s very much a challenge Flex wanted to take on.”

Spottiswood says that Flextronics felt that if they could take on the Raymarine challenge they would prove a point to “the world, themselves and us” and see a huge shift in the sort of business they can go after. “We’ve been there two years, and we’ve done a high season.

We’ve been extremely successful so I think the tick in the box is there and they feel vindicated that they could take on this challenge. I think people would have previously doubted that this was possible and said that it’s not the skill set of a tier one EMS provider. We’ve shaken the tree and proved that they can do it.”

The initial push

If there was some surprise within the company at how hard everyone had to work and the number of people that it had to input globally, it wasn’t news to Spottiswood - he’s done it before.

“You have to give huge amounts of support and pay the price in terms of time and money,” he says. “For the first year, I had a permanent team of six people in Hungary. Three would travel out on a Sunday – it’s no good turning up at midday on Monday and going home at midday on Friday, because a chunk of the week is gone. We always had purchasing and manufacturing people on the ground. I outsourced my factory as it stood – my test equipment, my design, and my manufacturing process. You can’t expect the local test engineer to fix the problems until he gets months or even years’ worth of experience.”

The initial push could soon be downsized of course. The original six has become two, who rotate on a weekly basis. “Now they are starting to design the test equipment themselves - they can manage it and understand the parameters.”

Much of the initial success of the transfer can be attributed to the loyalty and professionalism of a UK workforce that was facing redundancy. “Training went well. We had a very cooperative workforce that was given an excellent package when they left. The Hungarian operators were trained in the UK by the people I made redundant; the workforce was magnificent in training up the person who was taking up their job during their last month of employment.”

When the manufacturing cells were transferred, Raymarine took three team leaders over to Hungary to work with the Hungarians for two weeks. “Although you have the workshop manual and processes translated into Hungarian, some of the little nuances can’t be put into writing. It’s nice to be shown by someone live in the cell. We invested a lot of time and people in that. You can’t throw products, cells and test equipment at an inexperienced EMS partner.”

Spottiswood estimates that the entire transfer cost £21 million. “Half of that figure was in terms of the move itself. We had a large number of additional production engineers because I was running the factory here in parallel. It wasn’t a big bang, the transfer took a year.” During that year, Spottiswood had to keep volumes up and manage company growth of 16 percent. “It wasn’t a case of being static – it was a case of continuing the strategic growth of the company in the year I was shutting the factory.”

Supply chain savings

John Spottiswood estimates that the move has seen the company permanently lower its cost base by £10 million, although he stresses that this figure includes moving the supplier base as well as the manufacturing. “If Raymarine had already outsourced the supply chain, my impact would have been far less,” he concedes. “Because that hadn’t been done, the company had a local supplier base and a local factory. In one fell swoop we were able to take Raymarine from the Dark Ages to the enlightened future; it was ripe for the change. The biggest increase of the £10 million can be attributed to moving the supply chain, it was probably a two-thirds one-third split; you do save on manufacturing but not as much as people may think.”

The challenges and potential pitfalls of such a comprehensive move are numerous. Spottiswood says that the success of the project depended upon the company gaining an understanding of the realities of the outsourcing process. “I have a saying – you outsource the action, not the responsibility. I think part of the challenge was to change the culture inside Ray Marine - I think a lot of people would have liked to give Flex a purchase order and expected the product to miraculously arrive on time, on price and to the right quality,” he says.

“That’s not how you outsource. You have to carry on taking responsibility. I still have the same responsibility as if the factory was downstairs. I am unable to give the response ‘Flex didn’t make the product’.”

The principle applies to the entire company. “From engineering to service spares and quality – I haven’t taken away responsibility; I’ve just moved it to Hungary. People can be uncomfortable that they have responsibility but the tools to carry that responsibility have been taken away.”

Spottiswood’s solution was to downsize his teams in the UK. “My manufacturing quality team isn’t here anymore so my quality manager is possibly feeling a little bit more exposed – he has to remotely manage three or four Hungarians.”

He says that while he “has hit the golden nugget of price, quality and delivery,” people’s jobs at the company have actually got more challenging. “Yes, we’ve saved money, quality has gone up, and pricing has gone down. But why would having outsourced manufacturing make life easier for a test engineer, for example?

“This means a lot of flights to Vienna and a lot of three hour taxi rides to the factory,” he says. “Many people are finding that instead of going home every night, they’re out in the Far East doing first offs from tools, instead of doing it over lunch and then going to the pub with their mates!

“You have to take the longer term view – an extra effort is required in the outsourced environment. You’re either up for it and able to adapt to it, able to manage on conference calls and video conferencing, able to understand the psychology and culture of other countries or your not. It’s as simple and brutal as that.”

Seeing Ray Marine remain the leader in the marine leisure industry while also improving its margins, investment and share holder value is an excellent reward. “You get that advantage every year for the rest of your life – you’ve lowered the bar and it stays lower.”