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In this interview conducted at productronica 2017, Gardien Group COO Roland Valentini describes to Pete Starkey the limitations of the traditional outsourcing model for electrical testing and explains the need for customised solutions directly catered to customers’ individual requirements.
Starkey: Roland, it’s great to have the opportunity to sit down and review the last year or so. We don’t get to meet very often, so perhaps you could bring me up to speed with your observations on 2017 so far—what has happened in the business and what trends are you seeing in the market.
Valentini: Thank you Pete. It’s always good to talk with you. The year 2017 has been good. Some of the decisions that Gardien made have paid off. We focused on maximising the service out of our service centers and also incorporated some customer feedback, so the business is a little bit more streamlined. That gave us a very good run until July, and it’s still good. Machine sales in the group are up by 30% on last year, and the core business of service is up about 9%. Compared with last year, we have much better efficiencies overall, so we have seen an improvement of the numbers in general.
Starkey: Do you see this improvement in business as an indication that there’s more confidence in the market—an upward trend?
Valentini: It’s a very tough question to answer, because what we are seeing on the capital investment side and what we are seeing on the volume of products going through our 24 global service centers does not always match. And in this regard, capital investment is higher than we have seen before, and on the service side we have seen some improvement in certain markets but not necessarily overall. A lot of the additional sales that we have created are coming through new customers, because we have been better able to articulate what our businesses are, and have gotten a better response.
Starkey: In which geographical areas do you see the main increases in business?
Valentini: For us, the two main areas have been Japan and China. We have doubled in China pretty much, and for this year it’s been going well. We have seen a softening of the Taiwanese market, where the market is typically geared up towards a big bubble in the third quarter, which this year just hasn’t happened, and that leaves a certain part of the business a little behind expectations.
Starkey: Is the outsourcing service model a popular model in China? Is that the way people like to go, or do they prefer to remain independent?
Valentini: When we have internal conversations with our own teams, our position on the management side has been that the traditional outsourcing market is very difficult and is something that is maybe not going to maintain its status as it has been in the past. The market needs solutions that are more directly catered to the customer’s individual requirements. In China, what we have seen is not necessarily traditional outsourcing. What we have seen is customers with a specific need, wish or requirement, particularly customers who are in a growing mode, handing over certain parts of their production in order that we can help them through the teething problems that go along with their growth, and through the capital investment program that is part of their overall concept.
When we talk about the services we offer, we do quality control of their boards, predominantly electrical test, AOI and final inspection. But we now have customers, particularly in China, where after we do AOI, the customer takes it back, then after solder mask he hands the product to us and we do everything else, including the packing, and then hand it back to the customer for shipping. He has a complete area he doesn’t have to worry about—we do all the managing, the timing, the scheduling, to make sure he can meet his demands on time. This is particularly challenging because these are all quick-turn shops. That’s been an interesting journey for us, but it’s been successful for both sides. And what helps them is that they have a very predictable pricing scheme, so they don’t have to worry about things getting totally out of hand.
Starkey: I think that if you are in the service business, particularly the outsourcing business, you’re in the quick-turn business whether you like it or not. So you have that culture already built-in to your style of operation. As you say, it makes a lot of sense for you to take that whole back-end operation off of the customer, rather than the work go backwards-and-forwards, backwards-and-forwards.
Valentini: Exactly, we have concentrated our efforts and we are calling our main products now Gardien OnDemand and Gardien Integrate, instead of having a confusing variety of products.
Starkey: Roland, you have mentioned two products. Can you give us a summary of their main characteristics?
Valentini: Yes, and I can compare them to something outside the PCB industry—I think the dry-cleaning example is a good illustration: A Gardien OnDemand service is really like having a dry-cleaner around the corner. You sort your own clothes, and either because you don’t have the time, or because you find something that has a stain on it that you can’t take care of, you take them to the dry-cleaner. He has a fixed price list; maybe you shop around a little, but at the end of the day you have your preferred dry-cleaner and drop it off. That’s traditional outsourcing; which we at Gardien call OnDemand. Because that’s what it is—you’re there when I need you on my demand.
Starkey: And in that situation do customers tend to give you their problems, and handle the straightforward stuff themselves? When they encounter something that needs specialist attention, they come to you for help?
Valentini: The challenge with this customer-vendor relationship is that it’s unpredictable. You’re coming into the dry-cleaner’s shop and you’re frustrated because you’re number 20 in line, waiting to be able to hand over your stuff and explain your problem, whereas another day there is no queue but you have nothing to bring. And if you’re doing it yourself, maybe you make a mistake and end up with a pink shirt—this happens occasionally!
Talking about the second model, we have what Gardien calls the “Integrate” service. This is more like you are giving us the key to your apartment and telling us to take care of it. Gardien would then come in, take your clothes out of the hamper because by definition what you put in the hamper is what you want to have cleaned. But instead of you sorting it, we sort it for you. We put it into the right basket. We make sure it gets cleaned the right way. In a special case, we may even use the dry-cleaner, because maybe there is something that is so particular that you want to have the expertise of somebody who is focused just on that area. When it comes back, we iron it, we fold it and we put it back into the drawers, making sure that whenever you need them, everything is ready.
Starkey: So when you engage in this sort of operation, do you carry it out actually in the customer’s premises, so that you are effectively a department within that factory?