Electronics Manufacturer of the Year
Vanilla Electronics Ltd is a world-class technical supply chain company that helps OEM businesses to outsource their non-core activities and increase their profitability. We manage supply chains, procurement, manufacturing and logistics (including end-to-end fulfilment to customers and warranty returns). When Vanilla first started, we would kit for individual electronic components only, but as our knowledge of the industry grew and our supply chain offering expanded, we decided to evolve our model and provide a unique service to OEM’s that would completely change how they currently operate.
We saw an opportunity to provide full supply chain solutions to businesses that were very good at designing world-class technology-based products in small volumes, but that weren’t as good at managing the full supply chain and manufacturing in high volumes. In the last five years, we have moved to kitting full products, enabling tech companies to fully outsource their supply chain allowing them to remain in their current premises (no need for more space for production) and focus more on the design, sales and marketing.
Traditional CEM models will invest in lots of machinery and labour, wanting to do everything themselves, which requires significant investment and resource to enable you to manufacture large quantities. Where we are different from this model is that instead of investing in machinery and labour, we focus on what we do best which is procurement of material, managing the outsourced supply chain and providing complimentary services to our customers.
Our CAPEX is low, which enables us to invest in stock and pipeline materials for our customers, who are often presented with limited windows of opportunity to sell their products. We then outsource the PCB assembly labour element and manage that on behalf of our customers, Kit up fully tested PCBA’s, alongside cable harnesses, plastics, metalworks, fixings and packaging.
Due to our change in offering and amending our strategy we now offer full supply chain support, manage material lifecycles, obsolescence as well as outsourced manufacturing services. We found that as we buy better, our advantage over a CEM was that we are buying the labour from a CEM (usually a smaller % of the overall cost) and adding to our margin, whereas traditional CEM’s would be buying their parts from a company like Vanilla and then adding a margin on the majority of the cost. Often, this results in Vanilla being a more scalable and cost effective alternative to most other CEM models.
Our Project in Action
For our new work strategy to be successful, we knew we had to build and expand our network to include several CEM suppliers that we could trust. This process took us approximately three years, as we wanted to make sure we surrounded ourselves with people that had the same values and work standards.
Our goal is to be the market leader in supply chain management for the electronics manufacturing industry, which requires continuous work and investment in our core competencies, which is managing supply chains, material handling and shipping. We have installed two ten metre lean lifts which will store all of our 30K component stock lines, increasing valuable floor space for our kitting expansion. The lifts will receive the picklist directly from our ERP system and present the items directly to our kitting stations within our EPA. This new machinery, along with our smart feeders at our CEM sites, will monitor stock levels and attritions helping to increase our efficiency and reducing the risk of error. The extra space created by the lean lifts allowed us to build a new clinical fulfilment area to enable us to test our PCBA’s and sub-assemblies before dispatch in full kit.
We have also invested Â£30,000 per annum (license fee) for a sophisticated software that allows us to manage material lifecycles, obsolescence and alternatives. This system is invaluable to us as a business and to our customers as it allows us to see reports on individual components that go into a product and see if they are still in use, going obsolete or already obsolete. If the product is obsolete then we can search for alternatives to that particular component and report the results back to our customer. However, the real value comes when we are able to see if a component will be readily available for the entirety of a products lifecycle, which if it isn’t, allows us to show them alternatives, saving them a lot of time and money.
We also changed our ERP system which allows us to control our business right through from the quote stages all the way through to receiving payment from customers. The new system offers us a lot of flexibility and functionality that will grow alongside of us. Through the use of process control and automating certain activities through the process, the system helps to remove the amount of human intervention required in our previous system. The decision was made to change our ERP system as we felt it was limiting the speed of our growth by not being able to cope with the more demanding complexity of our products and services. We investigated many alternatives before choosing our final system, which we saw to be a complimentary tool for our business.
Vanilla is known for having high standards and making sure that everything we do is done to the best of our ability. In order to maintain this standard, we complete audits of our external manufacturing sites to ensure that our contractors are holding themselves and their employees to the same standard as we do. We also have a limited number of placements available for university students from the Cambridge department of engineering. As part of their dissertation they will come in and assess our efficiency, the layout and our processes and give us ideas about how we could improve different areas of our business. This is a valuable method of feedback for us as they are giving us a fresh insight into our busines, that we might be unable to see due to being use to our own environment.
The biggest barrier that we faced when making this transition was enabling our customers to understand how we could manufacture from our site in Thetford. When showing them around to see our office they would initially struggle to visualise how it would work as we don’t have surface mount lines, nor high numbers of employees in production. This is when we decided to be more transparent about our CEM supply chain, hosting events to show our customers exactly how everything worked and the processes we follow, so that they knew who and what they were entering into business with when they signed a deal with Vanilla.
Deciding to change the way we operated was a big change for both our customers and our employees, with key roles being played by Dan Croft our CEO, Mike Lewzey our Operations Manager, Tony Newman our Sales Director, Ed Batt our Sales Manager, Terry Howlett our Warehouse Supervisor, Sarah Davies our Senior Buyer and Sarah Eddowes our Manufacturing Projects Manager. All of which helped to diversify and add value to the business and our customers by embracing the change and being open-minded about our new strategy.
We aim to become the market leader in supply chain management for the electronics industry, which will allow us to continue to grow the business and be more profitable. We are always looking for ways that we can improve our offering and expand upon our services so that our customers are getting the best product/service possible. As well as growing ourselves we also want to help our OEM customer base to scale and scale profitably. One company we have worked with has managed to increase their cash flow significantly as well as increasing their weekly output.
We are continuing to grow and expand our capabilities and have just completed a significant investment deal with Literacy Capital plc, an investment company based in London. This investment is going to help us to expand our teams, so far this year we have already hired a CFO Matt Negus, who brings experience from a number of digital and technology businesses in senior financial and operational roles. More recently, having just fulfilled a marketing role, it has allowed for vacancies to open in sales, engineering, supply chain, operations and production. These extra vacancies are going to help us scale up and increase the amount of businesses we can take on.
Meeting objectives/targets and the benefit it has had for Vanilla
The investment that we received from Literacy Capital will help us to fund further growth, both organically and through acquisitions. Their help and support is going to enable us to invest more in the business by investing in equipment that complements our operation such as x-ray component scanning at goods in and smart reel storage at our CEM Partner sites to give real-time stock figures and monitor SMT Line usage accurately.
During COVID-19 Vanilla has thrived, we have improved our business continuity and have a good spread of customers across multiple sectors, giving us an in-depth knowledge into multiple areas. This has helped us to gain the respect of some of the highest tech businesses in the world, which has led to more opportunities to work with large organisations that are looking to improve their operational efficiency by outsourcing to Vanilla.
It is not only the business and the customers that have benefitted from our change in strategy, as we continue to grow and more positions become available, it is also offering our employees the opportunity to be re-deployed into areas of the business that they enjoy more or opening up more opportunity for career progression.
As an example of how our new strategy has helped to benefit our customers in both production and income, we look at one of our top customers who are a high-end audio company. Since outsourcing their manufacturing to Vanilla, they have managed to increase their output from 90 units per week to 110, averaging out at 130 per week within the last three years. Not only has this helped their output but they have also managed to improve their cashflow with them improving by 200K at certain points within their financial year. This has allowed them to invest more money into new product development, sales and marketing, helping them grow as a business.