Solectron Corp., founded in 1977, is the world's largest contract electronics manufacturers (CEM).

Solectron offers "a full range in integrated supply-chain solution for the world's leading electronics original equipment manufacturers" (OMEs). Headquartered in Milpitas, California, Solectron provides OEM customers with new product design and introduction services, materials management services, high-tech product manufacturing, product warranty .services, and end-of point life support services A very successful company, Solectron's fiscal year 2001 revenue was US$8.7 billion. Over the four-year period ending with fiscal 2001, Solectron achieved a compound annual sales growth rate of 43 percent. Solectron has over 40 locations in the Americas, Europe, Asia, .and the Pacific Rim Solectron has major customer bases in the computer, computer peripherals,

telecommunications, and networking industries as well as smaller customer bases in semiconductors, test and industrial controls, medical electronics, avionics, consumer electronics, and global positioning systems. As a contract electronics manufacturer with a wide range of customers, Solectron needs to be flexible. Because of its careful attention to detail in designing its production lines at every facility throughout the world, Solectron can .shift jobs or add capacity quickly and seamlessly In addition to providing outsourced, design and manufacturing services, Solectron is a global supply-chain facilitator that "helps customers drive speed, efficiency, and cost containment throughout the entire supply chain." Solectron aims "to minimize boundaries in the supply chain ... in an effort to help its customers attain the fastest time-to-time market with the lowest total costs, while helping them ensure the most efficient allocation of their scarce resources." Essentially, Solectron establishes partnerships with its OEM customers. In doing so Solectran takes" responsibility for the complete supply chain and for all activities required to support a product from the time of manufacture until its removal from the market." This allows the OEM customers to focus their resources on core competencies such .as research and development or sales and marketing Contract electronics manufactures, like Solectron are facilitating the development of "network organizations" and "virtual companies" that often do little beside designing and/or marketing a product. If a client both designs and markets a product, Solectron can handle the manufacturing and/or distribution of the product.If a client's core competency is product design, Solectron can manufacture, market, and distribute it. If a client's strength is

.marketing products, Solectron can p

erform all the other supply-chain activities

Quality is essential in all aspects of Solectron's Operations. Quality is essential for securing, developing, and maintaining effective "partnering relationships" with Solectron's customers. Also, Solectron operates on thinner profit margins than its customers do. Consequently, the margin for error is small; anything less than superior quality can have a .disastrous impact on the company's bottom line Every week the company asks its customers to grade it on quality, responsiveness, communication, service, and technical support. A grade of "B-" or lower initiates a qualityimprovement process; a grade of "C" or lower triggers a formal customer complaints .resolution process Solectron's concern with quality has generated very positive reactions among its customers. Solectron has received more then 250 quality and service awards from its customers. In addition, Solectron is an Industry week Best Managed Company Award winner and the first two time winner of the Malcolm Baldrige National Quality Award for .manufacturing In order to decrease costs, companies like IBM Corp., Nortel Networks Corp., and' CisCo Systems Inc, are increasingly outsourcing work to Solectron and other CEMs. However, when declining sales hit the OEMs, the CEMs are affected negatively - at least in the short term. Over the long term, however, this can mean more business for CEMs like Solectron. Clients may outsource more work in order to shave costs even more and to focus .more intensely on their core competencies Questions What is a network (or virtual) organization, and how does it differ from more traditional ?organization structures Why have network (or virtual) organizations come in to existence? How has Solectron ?contributed to the rise of these types of organizations What are the key factors in Solectron's success in facilitating the rise of network (or ?virtual) organizations What advantages and disadvantages do you think arise from a network (or virtual) ?organization relationship .4 .3 .2 .1