Elcoteq, Inc. offers electronic manufacturing services, providing supply chain management and after-sales services. It provides its services for personal communications products such as mobile phones, home communications products including set-top boxes and electronics for flat screen TVs, and communications networks products, which include base-stations, tower-top amplifiers, and microwave systems. Margins in this industry are razor thin, and Coleman Consulting Group was hired to help move their largest production facility in Monterrey, Mexico to a 7-day operation to boost capital utilization.
Elcoteq (facility in Monterrey, Mexico)
INDUSTRY: Electronics Manufacturing Services
WORLDWIDE EMPLOYEES: 17,400
U.S. EMPLOYEES: 5,000
REVENUES: $ $3.44 Billion worldwide
HEADQUARTERS: Richardson, Texas
Companies wanting to operate 7 days a week in Latin American countries face a number of hurdles that are both legal and cultural. Over time, maximum work hours, payroll, and payroll accounting are very different in Mexico than in the United States. Employers are required to pay premiums for work on Sunday no matter how many hours are worked, and many unions have negotiated those premiums to be double or even triple the straight time rate. Prior to seeking help from CCG, the management team and union leadership had implemented a 12-hour shift system, but due to labor laws, they were paying employees for time that was not being worked, and absenteeism was soaring from employees not showing up to work "recuperation" days that were poorly managed. Overall, the effort to improve capitalization drove the per unit labor costs through the roof. After two years of operating under this broken system, Elcoteq hired Coleman Consulting Group to help.
Following an operational analysis, Coleman Consulting detailed several models that would provide Elcoteq with increased flexibility, more efficient use of personnel by maximizing hours scheduled, easier management and more attractive schedules for recruitment and retention purposes. A review of payroll data after the new schedule systems was implemented showed that employees were effectively working more hours for the same pay, saving Elcoteq over $ 750,000 per year in labor costs. Additional benefits included a new night shift rotation for better weekend sharing, improved shift structure to allow for cross-training, more hours worked by the day shift to minimize the costs associated with turnover and improved shift structure for overall reduction of the workforce by area. Coleman consultants followed up with Elcoteq for 18 months to help the company manage the cultural change.
Coleman identified improvements that could be designed and implemented to recapture the excess labor dollars being spent and addressed the inequity between crews that was causing higher than average turnover. We found that management and administrative schedules did not support the 12-hour, 7-day operation, so there were significant losses in labor efficiency during shift start times and break/lunch times. Additionally, the "recuperation" schedule lacked the flexibility to prevent overstaffing during periods of demand increase and decrease. Using the Coleman methodology, we surveyed employees who expressed specific concerns around inequities in scheduling and disappointed with the increase in average hours per week from 42 to 45.
"We appreciate the fact that the Coleman Consulting Group continued to follow-up for eighteen months to help the company manage changes within our management team. You were able to blend the needs of our business and the desires of our employees into a solution that not only saves us money but also improves the welfare of our employees. Your experience will help employees and union leadership proved invaluable. Thanks again for your outstanding support!"
Pertti Mattila VP, Business Control & Finance