lnterview: Mark Dohnalek, President and CEO, Pivot International

Mark DohnalekPivot International is an ODM company with a global footprint. Trevor Galbraith interviewed Mark Dohnalek about supply chain threats from the coronavirus and the company’s growth strategy going forward.

So today, I am joined by Mark Dohnalek, President and CEO of a company called Pivot International. Welcome Mark, it’s nice to speak with you.

Thank you, pleasure being here.

Just to paint a picture for our readers, Pivot International it’s a public Tier Two company with about 12 different locations around the world. Can you just paint a picture of the type of product mix, your locations and a little bit about Pivot?

Sure. We are a product design and manufacturing firm that provides these services to our clients.
So, we take on initiatives in multiple industries from medical devices, to industrial security products, technical devices and some consumers products. So we take on from product concept, full design for manufacturing and actual manufacturing.
We have 12 locations in the US and Asia manufacturing, and we have offices throughout Europe and Asia both design offices, supply chain and manufacturing.

You said you have quite a bit of medical in the mix, so I take it that you’re ISO 13485 accredited?

Yes that’s correct, we are both ISO9001 and 13485 in our plants in the Philippines. We have two manufacturing facilities in the Philippines and they are both FDA certified and then we have four manufacturing facilities in the United States with engineering offices in Europe, USA and Asia.

This is a very challenging time to be a contract manufacturer anywhere quite frankly, I mean, we’ve got on one hand the changes coming thru on the manufacturing side with automation and having to reskill people and source people, people actually and on the other hand we’ve just come out of the first round of US/China trade war which had some supply changes issues coming thru and suddenly we are hit with the Novo Coronavirus. What kind of issues have you been facing in terms of the Coronavirus?

True, its very similar in many respects to the challenges we had with the trade wars. That we are fortunate enough to have locations in multiple continents. Our global supply chain organization has leadership by the United States and in Europe and Asia; both Shenzhen, Taipei and Manilla, The Philippines, so we are fortunate to have enough locations like large multinational companies who can pull levers, with different manufacturing sources or move sourcing from different locations we’ve been able to do a similar approach to that as we look at where the inflexion points are and the issues with trade wars, where we can move things around to avoid the heavy burden of tariffs or replacing the same kind of thing with the Coronavirus, its almost identical really! From the stand point that supply chains are being impacted by the epicenter of China where almost all components originate in electronics.

So we are having to look at double sourcing supplies and those kinds of strategies to cover our production needs in the near term, until these issues are resolved.

Did a lot of your work force return to work after the Chinese New Year?

Our direct employees did in the Philippines and Taipei and Shenzhen. Outside of Shenzhen, it’s a supply chain office only with some quality inspection people. It’s a small office, but they were able to work remotely and now they are back in the office. As far as our supply chain, the manufactures of the components that we buy, we are hearing that 10 or 20% of the people are already returning. There’s no question in the public companies, Apple just being the first two days ago, you are going to hear an announcement on shortfall on deliveries because those suppliers are impacted. We are going to hear more in the next month that there’s going to be an impact and probably by mid-March things might be back up to running at full speed but, in the interim you are going to have to be looking at alternative supply sources to narrow the gap.

I think there’s definitely going to be a supply chain shortage coming thru as a result of this. Has this and the trade wars last year, made you as a manufacturer take another look at the way that you spread the risk? You sound like you’re very well diversified anyway, but, are you thinking more deeply about how you spread the strategic risk across your manufacturing plants worldwide?

Well, I think both these episodes have unleashed a thought process in the global business community that you’re not going to put back in the bottle, so to speak. I think we are forever going to be in a strategy format going forward of dual sourcing, secondary sourcing, alternative sourcing strategies you can pull those levers more easily. We are fortunate that we have various locations that we’ve been able to moderate our risk but, this Coronavirus is almost a more compressed challenge because it happened so suddenly. With the trade wars we were kind of growing over a period of a year and a half so you had time to make adjustments. The coronavirus hit everybody suddenly after Chinese New Year, so I think that amplifies the need to make sure that the cost differential justifies the added resources and added risk or at least moderates it by splitting of some of that supply chain and have it be active so that you just easily cut the PO’s and send them to somebody else. So I think we are now in a period going forward that big corporates like Apple will change some approaches going down the road.

You mention looking at secondary supply chain sourcing and that sort of thing, obviously that’s going to move away from the big box company. Is that going to have you sourcing from the grey market?

We are probably going to avoid that we are going to try to stick to conventional methodologies. We are always going to be in a global supply chain footprint. That’s never going back to 1955 because embedded electronics started from China, at least many of the components and so some of the other things like the LCD screens that gradually moved over there, they can be moved around but, I think you have to look at the conventional lines of strategy that currently exist, maybe with different price points. But, perhaps if you look at the full picture this will be justified because of the less resources abroad etc. Probably when you add it all up, if there’s a 10% in foreign cost, it’s probably not worth having it coming out of Asia if it can be sourced in Europe or the United States at that price differential, especially in the electronics world.

Let’s take a look now at the technology side, your manufacturing lines and things like that, there’s a lot of automation coming in robotics, better storage towers for systems for getting close to the line. Are you adding any of these strategies into your factories?

Our PCB manufacturing is just one piece of our manufacturing. We don’t really push hard on contract manufacturing although we do have a couple of plants geared towards that but, we’re moving them into a mix of box build and PCB assembly, rather than just PCB assembly, which is a tough business if you’re a contract manufacturing entity. We are more than that because we are a design firm and a manufacturer but, certainly on that front because we find to be a more technical products there’s a heavier labor content to that it’s a lot of detail high end box building operation the automation there is not really practical.

But, certainly on our SMT and PCB manufacturing, those are highly automated and fast machines that can handle very small form factor PCB manufacturing which is kind of the trend, has been for a long time and will continue to do so. You want to automate that as much as you can because that is a very automatable type of process.

I agree, and by automating you are increasing your first pass yield and reliability.

You bet and we are going into 3D printing. Our whole model is Design for Build and the 3D printing technologies certainly are a key component to enable us to getting the product out of prototyping quicker and that’s a significant improvement. There’s a lot being said about 3D printing for manufacturing and I think at some point there will be a broader application, but its already having a meaningful benefit from a prototype and design stand point and how fast can do turn around.

What about the skills side of your business, are you having any issues felling certain skills areas within factories?

Certainly, when its involving technical engineering staff around the world that’s a difficult area. We are pretty good at it but, it’s a challenge to find good people because we are looking for design engineers, which is a different skill set then just a plant engineer. Plant engineers are still available, but are still in demand as well. Because our emphasis is designing products to build that’s a challenge, you have to be creative. A couple of the acquisitions we made involved very technical design firms. We acquired them not just for the people, but that certainly was a factor. It also gives us added technical capabilities as well which was the bigger reason for us. But, in the US we have 3.6% unemployment. It’s pretty thin at that point, you have to be creative here, you have to look for hires and how you promote your company. What’s the brand awareness, does your company have a good reputation? All those things matter on how do you attain good talent.

Certainly, hiring the production engineers that you’re hiring nowadays it’s more of a data driven job. Do they have to work more with data?

Yes, absolutely very much analytics and data driven for sure, we are a data driven culture in our company we focus on data, you still have to make visionary judgment calls. I know I have, we are a data driven culture and we are a data driven business really when it comes down to it.

As you said a couple of times you are a well-established ODM featuring design thru to final box build. You appear to have grown thru acquisition. Was that a key part of your strategy and is that something that you look to continue going forward?

Our growth has been truthfully both. Organic growth has been substantial and we have augmented that with acquisitions. But, our growth predominantly has been driven by organic growth and added growth from acquisitions.

We need people who are looking for a product to be designed and manufactured. so we spend a lot of time on digital marketing thru our website, but we are also looking for target acquisitions that makes sense.

You seem to have enjoyed a very successful run. I want to congratulate you and thank you for joining us and telling us about Pivot International today.

Thank you it has been a pleasure Trevor!

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