Navigating the Global Materials Supply Chain: A Roundtable Discussion
At SMTAI recently, I sat down for a roundtable discussion with some key players from the materials side of the supply chain. Participants included two executives from Ventec: Mark Goodwin, COO USA and Europe for Ventec International Group, responsible for all non-agent activity and the supply, distribution and service centers in the U.S. and Europe; and Jack Pattie, president of Ventec USA and as such, manager of North American operations for the distribution of laminate and pre-preg. Also participating in the roundtable were Schoeller Electronics CEO Michael Keuthen, head of the Germany-based company that has been producing PCBs for more than 50 years and specializes in rigid-flex and flex activities, and Bob Willis, from the National Physics Laboratory (NPL), known worldwide for measuring standards. In a wide-ranging chat, we discussed the demands and challenges of the materials supply chain and where they see their industry going in the future.
Shaughnessy: Mark, we'll start with you. What would you say are some of the biggest challenges you face in dealing with customers from a varied base?
Goodwin: Really, everything outside of Asia is now a quick-turn, high-mix business. We have to have the right materials in the right place to supply our PCB customers like Schoeller, generally speaking, with a very short lead time. That ranges from a few hours to a couple of days, but not much longer than that. I'm here to provide technical support and backup services to those customers as well. That includes full lab service capability to enable us to verify our products and our customers’ prices.
Keuthen: I absolutely agree with that. What comes out of the industries, specifically out of the automotive industries, logistically is now brought into the supply chain anyway and whatever logistical concepts we need to fulfill for our customers. Things like VMI and managed consignment stops without customers—all of these things actually need to go into our supply chain and be integrated vertically down to our suppliers as well. That's why for us it is very important having more than 1,300 different materials on stock (which sometimes is not even sufficient in daily business), to have reliable suppliers that are able to support our logistical system and have the right materials, of course.
Pattie: Yes, I can see that. Increasingly, with complexities that you have in materials, PCB manufacturers really have to be in partnership with their laminate suppliers. I think for a few reasons. One: we're all in this quick-turn market, so if you don't have material in stock, you lose that opportunity and your competitor may have that. That's very important. We become our customers’ inventories at times.
I think also the partnership with the PCB factory is very important because we need to know what direction you’re going so that we can plan. It's such an increasingly competitive market that if you're going to live on “me too” products, you're not going to be very successful in that company. We're always looking for where to guide the technical direction of our company so that we can plan for not now, but for five years from now. The partnership is really important in many different ways.
Willis: I think it's great to be able to have that information. I still find a challenge in that so many users of technology don't understand the technology. They're specifying things that they may or may not need. But also, when we're talking about going down to smaller and smaller pitches, the last 10 years we've been stretching technology in the materials we use. Every PCB manufacturer has had to take a design and massage it to get what a customer wanted out of the materials available. We are really at the limit. I think that, yes, we can produce a product and meet the specification, but the challenges for the future I think are immense.
Goodwin: One of the things we've done to properly address that is we very recently set up our own OEM team. We call it an OEM marketing team, but it's about a two-way information flow, not just us marketing our products to the OEM. We really want to know their roadmaps and where they're going. Also you've got to be very careful because a lot of the things you see happening in high-speed digital materials now is that everybody wants a custom laminate product. That puts an immense pressure on the supply chain because small quantities of very special products are very, very difficult to deliver. One of the messages we're sending out there is to try to get people to root their technologies around a product base so we stand a chance to deliver that within the time scales and be as reactive as the OEMs want us to be. I guess you guys are really stuck in the middle of this, aren't you? If we haven't got the products available you can't support the OEMs.
Keuthen: It is like that, definitely. The only chance to deal with this is obviously having a wide variety of products on board to be able to supply our various customers’ needs. That's one thing. On the other hand, we've got products that are not lasting for that long. When you think of the pre-pregs, it’s a three-month time period that we've got, so we are not really able to forecast that long to stock it very long.
Otherwise we have to retest it and that's something in the supply chain that came to my knowledge as well. That we've got a lot of problems getting these materials in time in our house and then have them available for at least three months. After that the expiration date of these materials is also done. That makes our life even more difficult.
Willis: A lot of customers just don't fully understand that these materials do have a shelf life.
Keuthen: That is true.
Willis: They come to you and the designers probably don't comprehend that. I think that one of the challenges again is the education. If you go back and understand how a designer works on a specification that he wants to achieve, with the greatest respect, so many designers never visit a PCB shop. They don't understand how it all is made.
I know that's basic stuff, but having that understanding first of all and then building on that is so important. Then when you make a point, he can understand what you're saying. He's not saying you're specifying something because there's more profit margin in it. You understand technology first. You help, you talk, communicate, etc. I think that's one of the nice things that a lot of major PCB manufacturers have done is get people that are experts in assembly and are experts in design and provide that expertise to the customer. Then you get a better build, a better understanding back from them so consequently you can do it quicker and you can do it at a more reasonable price because you've done your development up front.
Goodwin: One of the things that you bring up that's really interesting is, and Jack mentioned it earlier, it is in the competitive nature of our business to almost blanket the demands that come out of OEMs. One of the things that springs to my mind immediately that links in with what you were saying is about pre-preg retesting. We get OEMs that say you cannot supply a retested product. Now we make pre-preg to a specification. We measure a set of characteristics on that pre-preg, so it either passes or it fails. So with blanket bends on retesting, all they do is add to the complexity in the supply chain, delays in the supply chain, and added costs in the supply chain.
Actually I think mostly they're put in place by people that really don't understand that we're a manufacturer of a product. We make it to a specification. We test it to a specification. When we retest it, we retest it to that original specification. Either it passes or it fails. It's delivered with a retest certificate and a CMC and we're standing behind the retest we've done.
Keuthen: One of best ways to get a solution, obviously, came from the OEM and thank you for that. Because if we want it standardized and to have a product implemented that we have on board and perhaps subsidize other products that we don't need, it is actually the best way to get into the design phase very early with a customer, to think about what kind of materials we want to use setting up this PCB. If everybody would be that open to discussion on that in the early phase and get the supply chain involved in this during the early phase, it would be probably easier to get back to more standardized usage of material. The functionality of the board would be the same because you get the consulting activities from the PCB manufacturer who in the end knows, "Okay. For the prototypes this is how you do it. But in the end, how is this industrialized?“
That's the major issue that we've got. It's not building a prototype. It is in the end having a reliable industrialized production which we need to focus on.
Willis: At least one other point that's worth keeping in mind, and I think that the industry is doing that to a certain extent, is that original material manufacturers sell to the PCB manufacturer. However, they should sell to the designer instead.
The designer is comfortable and has an understanding. The classic case was DuPont. They always sold to the designer. Then perhaps the PCB manufacturer kind of suffered a little bit because it's been specified in before he was aware of it. I think from a commercial point of view, that's a good thing. Talking about NPL, we are very keen to do testing, evaluation, and understanding the problems. We've done massive work on CAF and CAF testing, trying to generate new techniques to measure susceptibility for CAF with different materials. That's just been really, really interesting.
Another project we did is looking at moisture ingress and the reality of how you get it out, whether you ever get it out and to the degree to which you get it out. Some of the work was done by a colleague of mine. You step back and you think it makes sense, but we just didn't appreciate it until somebody does this science. Anything we do now is all about science. Whether it's materials, chemistry, and obviously design aspects for components.
Pattie: I think when you get on the designers, sometimes there's a real silo mentality of just really thinking about what their needs are and not how it spreads out to everyone else. When we really started our OEM program, we call it an OEM marketing program, but it's also an OEM educational program. We really have to work with all our designers to understand all these implications. Having to be able to connect all three is very important. We also have a very competitive business, so it's not always that everybody works as well together as they often should.
Willis: I think there's also one other group that we probably sometimes perhaps don't like, not me personally, but certainly some: purchasing. A zillion years ago we used to do some training courses for purchasing people from very large companies. I was extremely surprised at how little they knew about the product they were purchasing.
True, they can't know everything they're buying, unless they're a very big company and they specialize in PCB fab or components, because they're buying loads of different stuff. However, there are a lot of companies that are bad at specification, so how can a purchasing guy compare two products if he hasn't got a good specification to start off with?
Pattie: I'll tell you one area that's a very serious problem right now—the metal core PCB business. There are no IPC specs for this. It's kind of the wild, wild West. There's so much misinterpretation in, what I would even say, is maybe over-purchasing. Purchasing a product that is way over specified that you don't need that type of product, because they don't understand what they're buying. We see that a lot.
Goodwin: Or actually worse, specifying something directly and then getting an inferior material because there are no standards for the material. The LED lighting is a really good example where there's a high capital cost to the change in technology and people are specifying the materials or changing materials for a few cents for materials. We consider our materials to be top drawer quality. We have competitors that have top drawer quality. We also have competitors that really don't and we look at all their materials. But with no specifications from IPC or an independent body, people just think it is metal-backed laminate and they can specify anywhere. When this starts to go wrong, this equation of capital cost to product life cycle is all going to come crashing down. I think there are some scandals that happen in this particular business.
Keuthen: From our perspective as a PCB producer, we are also asked to develop new technologies, of course. That's a completely different point of view on the supply chain then from your end. We are flex-rigid specialists and pioneers in this business from using flex-rigid. For more than 40 years we developed not only flex-rigid itself, but other technologies like semi-bend technologies and bended technologies and yellow flex technologies, as brand names we developed.
For all these technologies we actually need the support, of course, of manufacturers that are helping us out with the materials we need and making the tests we need. It's somewhat difficult sometimes to attract the interest of such a producer to get into these developments if you do not have this massive amount in your bag.
It's getting increasingly difficult for us as a PCB manufacturer to focus on these activities for further development. That's a point of what makes us different when we're talking about high-tech, low-volume, high-mix. We obviously need more development put into these technologies as well and we need to drive this. It was driven out of the U.S., out of Europe, and out of Japan obviously. Mass production is in China, that's clear, but if we do not drive these technologies and get the support of our suppliers, it will get difficult for the future of the activities. That's another challenge for us.
Goodwin: It is a challenge. The way we've designed our business model meets that challenge in some ways because we're interested in supporting the guys developing products in Europe and in the USA. Through our local service centers where we hold inventory, we have lab capabilities as well as most of those services. We have one lab for the U.S., and one lab for Europe. When those products do go to volume, we can support the volume because we're actually manufacturing in Asia and supporting the volume in Asia. We're happy to support the development side of the business.
Shaughnessy: To kind of wrap things up here, why don't each of you share where you see your biggest opportunities are for the future. Let’s start with you, Mark.
Goodwin: You put me right on the spot there. There is still very much a vibrant PCB business outside of Asia, but it's a different business. It's a service business these days. I've been in the laminate business since 1990, when it used to be all about square meters. It's not about square meters for us now, it's about service. We will continue to develop our service model to support our customers.
Keuthen: As a medium-sized PCB manufacturer, the only way to survive and to grow our business actually is to focus on our technologies. It is a high-end, low-volume, high-mix activity that we see out of our customer base in Europe, the U.S., and even when we export to Asia. It is a specific technology that we have to drive. We have to concentrate on flex-rigid and flex activities where we do our best business. Once we focus on that niche we can expand and grow our markets from there. I think that's a point for Schoeller Electronics.
Pattie: For someone who is managing the North American market, we see tremendous growth opportunities—not only because of our business model, which is very unique, but also the type of products that we have. We're heavily invested into the mil/aero and metal core, and we’re investing more and more in the signal integrated materials. We see a very bright future for Ventec in the USA.
Willis: With all our activities at NPL, the most activity of late has been on high-temperature laminates in high-temperature materials. We tend to focus on ceramics and a variety of different options. With three or four projects that we've been doing recently, we've moved slightly away from the laminate side of things to wearable materials, clothes, etc. That's been really exciting. I have been pestering my boss to find a really good application and the team has come up with a glove. Basically what we're going to do is create a glove that is going to do something, but by changing the resistance value as you move your fingers it becomes a component. That's, for me personally, quite exciting.
I still go back to the education thing. I think for the future, every business, be it assembly, OEM, or board fabrication, the more we help people to understand what is being done, the better the quality of the product will be, there will be less problems and theoretically the price will come down.
Finally, with the IPC standards one of the nice things that has started to happen is that the specification has to have data, and any change to the specification has to be based on data. It's not a matter of opinion, with us giving out very valued opinions based on years and years of experience; it's got to be based on data—which is something that hasn't always happened in the past, but now is fundamental. Then you can use the specifications with a lot of real confidence.
Shaughnessy: Well, I appreciate the great discussion gentlemen. This is interesting information for our readers. Thanks for coming by and putting together this impromptu roundtable.
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