Outsourcing: Brad Heath, CEO of VirTex Assembly Services (Part 3)

Sramana Mitra: Is Mexico the only Latin American country that is coming up in that near shoring trend?

Brad Heath: No. It’s the only one that we’re dealing with, but you’ve got stuff happening down in Brazil. You’ve got a number of others.

SM: Brazil is not easy to get to at all.

BH: It’s not easy to get to, but for the stuff that they’re trying to sell in that region … that’s one of the directions I think a lot of contract manufacturers as well as captive manufacturers are doing. They’re trying to build a product where the market for that product is.

SM: For the Brazilian market, products being built in Brazil [makes sense].

BH: Sure. There are a lot of people spending money down there. So, Brazil, South America, if you want to go do selling in that region, Brazil’s a pretty friendly place to go get that work done. And they’re fairly protective of that. If you want to sell there, they want a certain portion of the work to be done there. There’s a large portion of the manufacturing that’s being done over in Asia being sold in those regions as well.

SM: What is the size of the American contract manufacturing industry, work that is being done in America?

BH: I don’t know the exact size, but there’s still a lot of people doing a lot of manufacturing here. We’ve got probably 40 companies, that I know of, doing it in the state of Texas. There are several hundred more in California and all up along the New England seaboard. There’s a lot of manufacturing happening in the United States.

SM: And these are the mid-sized manufacturers?

BH: Mid-size and large. There are several of the tier 1, multibillion dollar guys – you’ve got the Foxtronics; you’ve got the guys like Celestica, Jabil. All have multiple manufacturing sites within the United States.

SM: What other trends are you seeing in your industry that are worth talking about?

BH: One of the things we’re seeing is a trend toward what we’re calling more niche products, products that allow people to do more … adding features and things to other devices, whether that be wireless communication back from some piece of commercial plan instrumentation, whether it’s a new method for attaching active RFID tags for asset tracking, or people who find a way to allow people to be more productive with existing assets through increasing technology. For those customers, we see huge growth in their markets.

SM: Are there any other trends worth mentioning or discussing?

BH: In behavior trends, we’re seeing that people want to minimize their inventory exposures and maximize their flexibility. We’re seeing growth. We’ve done about 22% to 23% growth this year so far, so we’re fairly happy with what’s going on in the high-mix, low-volume manufacturing segment. That seems to be a trend that was out at an industry group that supports the electronic manufacturing services. Everyone seems to be bullish on what’s going on in U.S. manufacturing.

SM: That’s very encouraging, given the depressing stories you hear everywhere.

BH: Well, there’s a concept – and I touched on this a little earlier – people think, oh, you know, we ought to bring all of this manufacturing back. If you brought all of the manufacturing back, you’d probably not be at the same levels of employment in manufacturing we were at 20 years ago. Machines have gotten faster. We’ve automated more. We’ve done what we can to make ourselves as competitive as possible in the markets that we are. One of the things that’s necessary is we’ve got to continually become more efficient and be more productive per employee. The other piece that’s not going to come back is they’re selling into these markets. So, if you’re selling 200 million iPhones in China, you’re going to build them in China. You’re not going to build them in the U.S. If you’re selling them in Brazil, you’re going to build them in Brazil. It’s a global manufacturing,and sales marketplace now. So, it makes sense to put your manufacturing where your market is.

This segment is part 3 in the series : Outsourcing: Brad Heath, CEO of VirTex Assembly Services
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