FOCUS ON BUSINESS
Making a Good Business Case When Delivering Bad News
The wrong attitude can send customers shopping for a new EMS provider.
I frequently say program management is the most difficult job in the electronics manufacturing services (EMS) industry. Program managers play a dual role of their customers’ champions within their organization and their employer’s enforcer to ensure each account hits its revenue and profit targets. I see great similarities between PMs and airline gate agents, for whom getting customers where they need to go is often impeded by forces outside an agent’s control.

If we use that gate agent analogy to describe the program manager’s dilemma in today’s chaotic materials situation, the plane is running four hours late; the passengers who were loaded an hour ago now need to be told the crew needs to deplane because they’ve exceeded their legal flight time limits, and there are no alternate flights because a bad storm has shut down the entire East Coast. The state of imbalance between supply and demand in today’s materials market is so bad, the issue isn’t whether customers will be disappointed but how badly they will be disappointed. Program managers are the point people in delivering that bad news.

The silver lining, as it were, is everyone is experiencing these challenges. It isn’t just the small EMS firms or ones that specialize in certain industries. Material is becoming so constrained even brokers are failing to deliver. The gate agent analogy can be helpful to keep program managers on track about the best approach to this challenge. Anyone who flies a lot knows there are two types of gate agents. The first type hates bad flying days and depends on the structure of the job to insulate themselves from angry passengers. They make gate announcements discussing delays as infrequently as possible. They respond to questions by saying nothing can be done about the situation. When a late plane is ready to board, they handle the boarding process exactly as they would an on-time plane.

The second type of gate agent puts themselves in their passengers’ place. They share information as they get it, help delayed passengers with information on their options, even when there are none, and work in tandem with the flight crew to speed the boarding process. Which agent do you want at your gate on a bad travel day?

In short, even when the situation is completely out of the program manager’s control, it is important that customers see a program manager who is committed to doing their best to mitigate issues that negatively impact each program. People trust those who appear to be trying much more than those who demonstrate in words and actions that the situation is hopeless.

What is the best way to communicate the current situation?

Man working in office
FIGURE 1. Be transparent, and share bad news immediately.
  • Be transparent. Understand what your company can and can’t do relative to each customer’s constrained components. Be candid. Share bad news immediately.
  • Be proactive. Analyze each customer’s program for current and near-term risks and present them with your assessment. Update it regularly. Many EMS providers are developing customized reporting to make this easier.
  • Coach. Discuss options for lengthening forecasts, choosing alternates or setting a range for PPV. The current situation requires a higher degree of collaboration and visibility in demand trends in the coming year.
  • Build a business case. Most customers understand costs are increasing across the board. It is customer nature to push back on price increases, however. When price increases are necessary, be able to discuss the underlying drivers.
  • Be knowledgeable. What is your company doing to level the playing field? Be able to discuss those efforts.
  • Understand the role EMS providers play in the cash conversion cycle. Like it or not, many domestic EMS providers fulfill the role of a bank for their customers by absorbing inventory and manufacturing costs during production cycle and permitting the customer to pay a month or more after they’ve received products. The margins for this are thin compared with those most OEMs enjoy. When higher levels of inventory must be held, there needs to be cost sharing. Be able to walk the customer through that added part of the value equation because the ones who measure cost per placement on a spreadsheet as part of their outsourcing model don’t understand it.
Analyze each customer’s program
for current and near-term risks
and present them
with your assessment.”
  • Document everything in writing. EMS companies are holding more inventory than usual to hedge against supplier decommits. That could translate to excess inventory if the market normalizes, demand drops, or a product line is discontinued or redesigned. Document every conversation that involves buying long lead-time items beyond contractual terms, acceptance of price variance, use of nonauthorized resellers or increasing either raw material or finished goods Kanban. Customer memories get short when there is excess material or a market downturn.
  • Be prepared for a rant. Sometimes letting a frustrated person vent is the best way to calm them down. Keep emotions in check and you’ll control the outcome of the conversation. Respond in kind and nothing will get resolved.
  • Stay optimistic. All cycles eventually end. Things will improve. Program manager optimism that all options are being explored keeps customers, particularly if efforts result in even small successes. An attitude that nothing can be done tells customers they have nothing to lose by shopping for a new EMS provider.

There is no question that the program manager job became a lot harder in 2021. That said, the skills set developed in times like these is seldom replicated in less challenging times. It doesn’t just build great program managers. It builds people capable of moving up to higher levels in the EMS industry. Chaos creates opportunity.

Susan Mucha Portrait
Susan Mucha
is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services; smucha@powell-muchaconsulting.com.