Geography of Production
Linkages in the Irish and Scottish
Microcomputer Hardware
Industry: The Role of Logistics.
Dr. Chris van Egeraat
Dublin City University
Business School
CISC Seminar, July 2003
Structure of Presentation
 New High Volume Production Approaches
 NHVP in the microcomputer industry
 NHVP argument for proximity - logistics
 Findings
Geography of production linkages
Logistical arrangements (hubbing)
key-logistics data
 Conclusions and policy recommendations
NHVP Approaches
 Lean Production/Supply (Womack et al./ Lamming)
 Mass Customisation (Pine)
 Time-based Competition (Stalk and Hout)
 Answer changing market needs - fast response,
greater variety and customised products. All
achieved with little cost penalty
 Customer relations and distribution system - fast
response and reduction of inventories
 Assembly plant - JIT production and build-toorder
 Supply chain - JIT supply
NHVP in the Microcomp.
Hardware Industry




Great variety, customised, short order lead times
Minimise inventories of finished systems
BTO production strategies
JIT manufacturing
 Market for microcomputers characterised by
strongly fluctuating and unpredictable demand. The inventories in the supply chains could not be
minimised without the risk of inefficient use of
machinery and labour at the suppliers.
Agglomeration Factors
Agglomeration factors
Factors
related to
the labour
market
Factors
related to
product flow
Factors
related to
information
flow
A local pool of workers maximising job-matching
opportunities
NHVP
argument

Efficient product flow/logistics

Efficient formal information exchange in the context
of inter-firm functional integration
Efficient formal information exchange in the context
of vertical disintegration
Socio-cultural and institutional factors enhancing
formal and non-formal information flow between
actors that are part of the local milieu.

NHVP Argument for BuyerSupplier Proximity
 NHVP approaches involve a greater appreciation
of the costs of holding inventory.
 TLC = ordering/set-up costs cost + inventory
holding costs + cost of transporting the goods
Traditional
CLMPs - JIT
Q* 
2mS
Ic
Qi * 
2m( S  ad i )
q  s  Ici
Outcomes of the CLMPs
 Elimination of buffer inventories; kan-ban
deliveries on a daily basis; near synchronous
production; co-location - ‘True JIT’, ‘Full JIT’
 At the other end of the spectrum the pipelines of
components might involve less frequent
shipments, substantially higher buffer inventory
levels and suppliers located at great distances
Labour cost differences among regions
Value, bulkiness and weight of components
Minimum efficient scale of component production
Variety of options per component category
Sources of Material Inputs
Material input
Enclosures and
racks
Main geographical sources of parts and components
For high-volume models and portables: mainly local and
to a lesser extent Far East; For less current models and
racks: USA and local
Motherboards,
For most focal companies: Mainly Far East and, to a
backpanels and riser lesser extent, USA; For two focal companies: mainly
cards
Scotland and England
Microprocessors
Mainly South-East Asia, small amounts from Ireland;
For proprietary technology: USA
Memory
Mainly Korea and Japan and small amounts from USA
and Europe
Hard disk drives
Far East, notably Singapore
Floppy drives
Far East
CD-ROM drives; CD- Far East
RW drives and DVD
drives
High capacity disc
For lower-end technology: mainly Far East;
and tape drives
For higher-end technology: USA, Far East, and Europe
Sources (Continued)
Power supply
Heatsinks
Cooling fans
Batteries and ACadapter (for
portables)
Modems and network
components
Graphics, video and
sound cards
Cables and
interconnect
Screws, fasteners
and other c-class
items
Low-end: mainly China, Malaysia and Thailand;
High-end: USA and, to a lesser extend, Far East, Europe
and England
Mainly Far East, notably Taiwan; to a lesser extent USA
and England
Mainly Far East; to a lesser extent USA; some England
and Germany
Far East
Mainly Far East and USA, although four suppliers were
manufacturing in Ireland
Mainly Far East, notably South-East Asia; Individual
sources in USA, Canada, Mexico and Germany
Mainly the Far East and, to a lesser extent, Ireland and
Scotland.
USA and, to a lesser extent, local
Sources (Continued)
Displays
Keyboards, mice
and joysticks
Printers
Scanners
Digital cameras
Speakers and
microphones
Docking stations
Media
Accessory kits
Packaging material
Mainly Far East; Wales and England for few selected
models.
Manufacturing in Far East, notably China and South-East
Asia;
Printing of non-English language key-board models local
Mainly Far East; to a lesser extent USA, Canada, Europe
and England
No precise data, but not in Ireland or the UK
Far East
Mainly Far East, notably China
Far East and on-site
Printed manuals: mainly Ireland, and to a lesser extent
Scotland;
CD replication: Ireland, Scotland, Wales, Germany and
USA;
Wrapping of digital and printed media: local
Local
Local
Inbound Pipeline Structure
 Hubbing
 Turnkey supply-chain-managers
 Local manufacturers holding buffers
 Most pipelines involved locally stored buffers of
finished components on the books of the
suppliers
 Interpreted as a pseudo or apparent JIT system
that holds little benefit for the supply chain as a
whole. However, the use of hubs, in itself, does
not necessarily mean that the supply system is
sub-optimal.
Control over Pipelines
 I give [the suppliers] my MRP every week for that
product and I expect them to manage the chain
between them and the hub, I expect them to turn
it up, down, slow it fasten it and manage it so
that I always have 10 days [worth of inventory] in
the hub. … We run queries here every day by part
number which sends out an exception report
which shows me what suppliers have less than
10 days. And the buyers call them. And it also
shows us what we have too much of. And we than
proactively take actions twice a week. … All the
vendors are on-line to Irish Express Cargo [the
3pl hub]. All the vendors have the same kind of
contact. That is a criterion that Gateway gives
(Interview Flynn, Gateway, 1999)
Key Logistics
Data
Average target Average number
buffer levels
of days between
shipments
Material inputs Far East
and Americas
Microprocessors
Flat panel monitors
Memory
LCD displays
Partly integrated portables
Tape back-up/ autoloaders
AC adapter
Hard disk drives
CRT monitors
Small plastic metal parts
Floppy drive
CD ROM drive
CD RW drive
Combo drive
Zip drive
Docking stations
Joysticks
Scanner
Server racks
Sound/video/graphics cards
Power supplies
DVD drive
Modem/network cards
Enclosures
Motherboards/backpanels
High volume keyboards
Printers
Enclosures for portables
Heat sinks
Microphone
Cooling fans FE
Battery for portable
Riser cards
Speakers
Mice
Power cables
Other cables
4
5
8
8
10
9
9
9
9
10
9
9
10
10
10
10
10
10
8
9
9
10
9
9
9
10
10
10
9
10
10
13
10
13
13
14
15
2
5
3
4
4
5
5
5
5
5
5
5
5
5
5
5
5
5
7
6
6
6
7
7
7
6
6
7
7
8
9
6
9
7
9
10
11
Typical
preferred mode
of transport
plane
limited data
plane
no typical mode
plane
plane
plane
plane
ship
no typical mode
no typical mode
plane
no typical mode
limited data
plane
no typical mode
ship
ship
no typical mode
plane
ship
plane
plane
ship
plane
ship
ship
ship
ship
ship
ship
no typical mode
plane
ship
plane
ship
no typical mode
Key Logistics
Data (Cont.)
Screws and fasteners
Material inputs Europe
Power supplies
CRT monitors
Tape back-up/ autoloaders
m' boards/ backpanels
Memory
Enclosures for portables
Cooling fans
Hard disk drives
Other cables
Printers
Sound/video/graphics cards
Material Inputs Ireland and
UK
Packaging
Low volume keyboards
Country kits
CD ROMs (wrapped)
Printed media (wrapped)
Heat sinks
Enclosures
Hard disk drives
Server racks
Small plastic metal parts
Modem/network cards
m' boards/ backpanels
Power supplies
CRT monitors
Printers
Flexcircuit
Printed labels
Power cables
Other cables
Cooling fans
Average target Average number Typical
buffer levels
of days between preferred mode
shipments
of transport
35
40
plane
5
8
8
10
8
10
10
8
10
10
10
2
2
2
4
4
5
5
6
6
9
9
9
10
10
10
10
13
13
13
came
integrated
2
2
3
1
3
2
2
4
2
5
5
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
truck
Conclusions
 Vast majority of components from the Far East
and pipelines involved inventories in hubs
 However, logistics systems are not sub-optimal
Policy implications
 One should not expect a drive in the direction of
‘true-JIT’ and an increase in local sourcing.
 The strategy of building integrated vertical
production clusters around subsidiaries of MNEs
is unlikely to meet with success. - ‘Local sourcing
route to cluster development’
 Alternative is ‘technological innovation route’
(Young et al. 1994).
Job losses & Plant Closures Ireland
Western Digital
Logitech
Keytronics
Seagate
Mitsumi
Alps
Acco
Apple
Intel
Intel
CTM-Southborough
Quantum
Fullarton
MKIR
CTM-Southborough
Volex
APW Galway
SCI
Modus Media
Industrial print
Foxteq
Volex
Flextronics (Tullamore)
Flextronics (Limerick)
CTM-Southborough
Trend Technologies
MSL (Athlone)
Volex
Keytech?
1992
1995
1996
1997
1998
1998
1998
1998
1998
1999
1999
1999
2000
2000
2001
2001
2001
2001
2001
2001
2001
2002
2002
2002
2002
2003
2003
2003
Closure of automated circuit board facility
End of mice production activities
End of actual keyboard production activities
Closure hard disk drives assembly facility
Closure keyboard production facility
End of actual keyboard production activities
Closure plastic component facility
Closure motherboard assembly facility
Closure motherboards and system assembly facility
Closed Pentium cartridge assembly facility
Job cuts at enclosure production and subassembly facility
Job cuts at tape/ hard disc configuration facility
Closure of enclosure production and subassembly facility
Closure of hard disk production facility
Job cuts at enclosure production and subassembly facility
Job cuts at cable production facility
Job cuts at enclosure production and subassembly facility
Job cuts at printed circuit board facility
Job cuts at media/kitting facility
Job cuts at logo manufacturing facility
Closure enclosure production and subassembly facility
Job cuts at cable production facility
Closure enclosure production and subassembly facility
Closure of network component production facility
Closure enclosure production and subassembly facility
Closure enclosure production and subassembly facility
Closure printed circuit board facility
Closure cable production facility
Job losses & Plant Closures Scotland
Ecco
IBM
Rodime
Conner Peripherals
Digital Equipment
<1995
<1995
1991
1993
1995
Sun Microsystems
1998
Clairemont Electronics
(formerly Lithgow Electr.)
Lite-On
Compaq
Apricot
IBM
AMP
Seagate Irvine
Amphenol
Solectron
Techdyne
Sanmina-SCI (Irvine)
Foxteq
Chunghwa
1998
Closure keyboard production facility
Outsourcing monitor and keyboard production
Closure hard disk drive production facility
Closure hard disk drive production facility
Sale Alpha processor fabrication plant in Livingston
Closure processor packaging line in Ayr
Outsourcing circuit board assembly to CEMs in Scotland and
England
Closure of monitor assembly line
1998
1998
1999
1999
1999
2000
2001
2001
2001
2002
2002
2002
Closure monitor assembly facility
Shift of motherboard assembly line to Singapore
Outsourcing motherboard assembly to MSL in Ireland
Outsourcing server board assembly to Solectron Scotland
Closure of cable assembly facility
Closure disk drive configuration facility
Closure cable assembly facility
Closure of motherboard assembly facility
Closure of cable assembly facility
Closure of circuit board assembly facility[c1]
Closure enclosure production and subassembly facility
Closure picture tube production facility
Gateway
Apricot-Mitsubishi
Packard Bell-NEC
Configuration centre
Source: company interviews