January 08, 2001, 12:38 PM — CELESTICA, AN IBM SPINOFF that has become a leading contract electronics manufacturing company with $5.3 billion in 1999 revenues, has been on an acquisitions tear. In the time between its IPO in 1996 and last August, the company has absorbed 20 organizations with 34 facilities. And it's still on the prowl. But as those new manufacturing sites appear under the company name, Celestica has had to integrate their operations with its own.
To achieve that end, the Toronto-based company has developed what can only be considered a SWAT-team approach, in which trained personnel bring the acquired facility up to speed. That includes installing wide area network connectivity as well as SAP's enterprise resource management system and product data management software, including Matrix from MatrixOne and eSource from Aspect Development (recently purchased by i2 Technologies). Remarkably, this all is typically brought live within four to six months. Doing this once would be impressive; repeating it time and again seems just shy of impossible.
It is a feat managed with precision and driven by necessity, combining learning from the past and planning for the future. Over time, the IT department, working with the supply chain group, has developed a series of templates for different types of acquisitions, including business processes and employee training as well as software configurations. "We had a bit of an integration task force with people from M&A [mergers and acquisitions], myself and supply chain people," says Lisa Colnett, CIO and senior vice president of worldwide process management. In Celestica's experience, standard business processes and vanilla implementations of the software with as few modifications as possible are vital. "It makes your upgrades to new versions much easier than if you have a heavily modified system," says Harvinder Sembhi, director of supply chain management integration.
The approach also helps manage clients. "One of the main business drivers for that is to have one face to our customers," says Colnett. Celestica gives customers such as Sun, Lucent and IBM information about the production process. Since many are global concerns, the company wants to provide a unified look and feel.
Fast absorption smoothly moves acquired employees into the company, which is also good for the bottom line. As soon as possible, Celestica puts more business through the location, spreading fixed expenses over more products and driving down unit cost. Uniform systems also make procurement more efficient and drive down costs of materials, because purchasing by all locations can be aggregated. Another benefit of uniform processes is promoting intercompany communication.
According to Tom Cook, a senior analyst at Boston-based AMR Research, working well with new facilities is important to a company's stock. "In order to fulfill the promises of growing not only revenue but income going forward, they've got to put in systems that enable the collaboration and cost savings that an optimized supply chain will provide them," says Cook. "You want to show it's a valuable stock where you're not only building equity, but you're building the cash flow to keep going forward."
Before starting any implementation, Celestica meets with staff from the newly acquired facility to discuss the task and to explain what is negotiable. "Over time, we have been more prescriptive about those more nonnegotiable pieces," says Colnett. "It's not up for discussion." The reasons are practical. Although aat first Celestica would discuss best practices with new acquisitions, the number of manufacturing sites connected to the corporate systems makes any change difficult. In addition, by maintaining a fixed approach, the company can leverage its experience to quickly integrate the new site. The uniformity also allows Celestica to rapidly bring its clients' new products into worldwide production. "If you don't have the same bill of material systems, the same ERP system to support the supply chain, you can't introduce the new product quickly in multiple places and meet their market schedules," Colnett says. Outside the necessary software and business process elements, each acquisition also has a transition plan that is tailored to the specifics of the situation. "It's not a fixed answer for everything," she says.
