[The interview below is an abridged version of a broader conversation with David Brakenwagen of Solectron. To listen to the full interview, and others in the Executive Q&A series, click here.] Like it or not, outsourcing and offshoring have become business as usual for many manufacturers. Solectron has built a business on providing outsourced manufacturing and supply chain services to electronics manufacturers and other companies around the world. For those looking to offload activities that aren't central to their business processes, save on labor costs, or gain entry to new markets for their products, Solectron has an answer. But the job of interfacing with customers' widely varying IT systems is no easy task, explains David Brakenwagen, the company's vice president of sales and account management, in this exclusive executive interview.

Q: How do you see the manufacturing and integrated supply chain services market playing out this year, and how do you see it evolving in the next couple of years?
A: Well, the markets today across multiple segments are doing quite well. In some segments, there are a little bit higher growth expectations, dependent upon which analyst you're looking at. But if I look at it from an IT standpoint, IT spending is quite healthy. If I look at some of the emerging markets, such as industrial, from an outsource spend model, those are progressing a little bit higher than they have in past years.

Q: And Solectron is actively trying to grow its industrial business; it's 10% of your business right now?
A: Yes, approximately. The industrial segment for us is an absolutely rich environment, we feel. One reason is that the outsource model has been very much supported by traditional markets such as telecommunications, computing, and storage. The OEMs in this segment are really starting to embrace the model and see the value that the contract manufacturers can offer.

Q: Are there new or different services that these manufacturers are asking for?
A: Yes. In fact, the manufacturing piece today, which has been the core for the industry, is being expanded into pre-manufacturing and post-manufacturing opportunities. In the design phase, for example, lots of customers are coming to us for value engineering-type applications, design for test, and like activities that will enable their engineers to focus on the future products and the visions of where they need to take their market.

Q: Solectron has adopted lean Six Sigma as a key strategy. Many other manufacturers have done the same thing. So, what is it about the discipline that you feel has provided a competitive edge to the company?
A: Well, Solectron embraced the culture of lean Six Sigma approximately four years ago. [Before that] we had pockets of it but never truly had a deployment plan in place across the globe. What this has done for us as a company is it's really given the various levels of the organizations, down to the operator, the ability to enjoy and gain the benefits from doing things in a much more effective way. Reducing waste is a core initiative within that profile.
What it's done for Solectron is twofold: It's really helped us be able to serve our customers and their markets better. For example, cycle time reduction is a key one: as demand becomes perishable, delivery times have shortened. This is one initiative that has allowed us to improve those types of metrics for both customers and their markets.

Q: Solectron has adopted the tenets of the Toyota Production System model. Is Solectron putting a different spin on that, or is it basically the same model?
A: It emulates the Toyota Production System, which we felt as a company has great credibility. It's been in place for over 50 years. What's happening at Toyota is that it's still evolving, and this is a journey and it will continue to evolve at Solectron over numerous years. The fact of the matter is it's based on continuous improvement, so there's no magical formula that we've employed outside of the Toyota Production System. It's really about keeping focus on the objectives that we're driving toward.

Q: Solectron not only provides services in manufacturing and assembly, but also in the collaborative design area. What's been the experience with your customers in applying Six Sigma principles to this area?
A: This is an area that is really a growth engine, especially as R&D budgets are getting cut at OEMs, etc. But what we really see is, from a customer standpoint, Six Sigma is based on removing variability within the designs at the onset. We don't particularly see that flowing down to Solectron. A lot of that is still being done internally, but it is starting to flow and there are methodologies in place that we have that will help us improve the manufacturing aspect of that design, which we're overlapping with those OEMs right now.

Q: As a business, Solectron experienced what your former CEO, Mike Cannon, called a "return to growth" in fiscal 2006. The company also announced a restructuring plan that will consolidate about 700,000 square feet of facilities. How will the company support new markets or grow some of the industrial automation markets while consolidating facilities?
A: Well, the facilities that are still in place, the service levels required will still have the ability to look at low volume/high mix, or the characteristics required for these types of product sets. It's not being eliminated by any stretch of the imagination. In fact, we're very committed to ensuring that we still have the proper service levels at the sites required within the given regions. What we're trying to do is look at where it does make sense to move to a low-cost region. There's lots of expansion going on in those regions within Solectron, in addition to the things that you just read about.

Q: It must be a complex process to have to manage the number of customers that Solectron has. What is your corporate IT applications backbone, and have you standardized on an enterprise-wide automation platform as well?
A: Yes. IT is probably — other than people — the thing that makes the business work. We are standardizing on an SAP platform, which is being rolled out. The important thing, though, is that within Solectron we have various amounts of bolt-on-type IT applications to support whatever business metric that we're required to do. SAP is the standard that we're implementing, but it's not one size fits all. Every Solectron customer has a different requirement. We have to be flexible in that. So, SAP is the foundation and then the engines are sometimes bolt-ons in order to fit the needs of the customers.

Q: There's a lot of talk these days about integrating the plant floor and the enterprise. Are you saying that you really can't do that in your model?
A: No, no, that's absolutely done. We have to stay connected. As we look at plants and utilization and material flows, we have to continually look at supply chain. [On-demand software provider] Kinaxis is an example of one that we use to look across the globe, not on a site-centric basis, and understand what is the best approach to solving a certain problem.

Q: How do you view emerging technologies like service-oriented architectures, RFID, and wireless systems. Do those fit into your model as well?
A: Yes, these technologies are really fast-approaching. RFID: We see a lot of it, especially at our customer level. Wireless communication: We have plants that are completely wireless, and the shop floor control systems are operating in that fashion. Not everyone is like that, honestly, but we see these as technology growth engines that can only help us become more effective and more efficient.

Q: What are your top priorities for 2007?
A: Within the industrial segment, the top priorities really are to continue to drive an optimized supply chain in the markets that we serve. We need to have the engine in place that allows them to service their customers.
The other piece that's happening quite a bit is post-manufacturing services. As we continue to grow in higher-level system integration with these folks, that priority will continue to grow downstream in how we deliver service and support. So if I look at it, that's really the number one priority.