Founded in 1993 in St Gallen, Switzerland, Variosystems is an electronics manufacturing service provider. The company is ISO 9001:2008 certified with about 1100 plus employees globally, and an annual global sales turnover of around US$ 130 million in 2015. The company’s Sri Lankan branch is now into competitive contract manufacturing of PCB assemblies and cable harnesses. Sneha Ambastha from Electronics Bazaar spoke to Shanaka Perera, purchase manager, Variosystems (Pvt) Ltd, to find out his views about India as an electronics outsourcing hub
EB: Please share a brief overview of the electronics manufacturing industry in Sri Lanka.
Currently, Sri Lanka is not that big in the global electronics industry. It has few electronics design houses and some manufacturing companies. But there are only two major EMS companies in Sri Lanka capable of operating in both logistics and engineering, including production. The rest of the companies enter manufacturing only when they get all the materials from their head offices. However, as per the recent government announcements, foreign investors have been invited to Sri Lanka, and seven amongst them have received the duty-free facility. Thus, it appears that in the next two to three years, Sri Lanka will emerge as a good electronics hub both cost wise (because of lower labour costs) and with regard to logistics.
The Sri Lankan electronics industry is also concentrating on opportunities to sell electronic components and assemblies in India, in the areas like telecommunications, consumer electronics, biomedical and automotive electronics.
EB: What are the major sectors driving the growth of the Sri Lankan electronics industry?
Wire harnessing is the major sector for the Sri Lankan electronics industry as it involves a lot of labour, and is slated to grow further in the next few years.
EB: How important is India in the electronics industry value chain/supply chain of Sri Lanka?
India plays a very important role in the Sri Lankan electronics supply chain, particularly for the mechanical and metal industries. Buying components from India helps us save a lot.
EB: How should the Indian and Sri Lankan electronics industries collaborate to move up the value chain in the SAARC region?
India should have faster customs procedures as, in my experience, even with some urgent shipments—it takes two to three days for the customs process. It takes the same time to bring in the material from the EU. That should be avoided.
EB: What are the best practices followed by your company for vendor development to facilitate both local and global sourcing? Do you have any specific plan to engage vendors from India?
Yes, of course. We offer proof to our head office about how much we save by buying from India rather than from the European Union (EU).
In order to engage vendors from India, we should first identify the best distribution channel for specific manufacturers and hold trade shows. It is difficult to travel everywhere but trade shows are a good place to meet and discuss all current issues. So we can invite all our vendors to come and meet us under one roof.
EB: Do you think India can establish itself as a major outsourcing country with respect to electronics products and raw materials?
Yes, I believe India has that power to establish itself as a good supplier of raw materials and products.
EB: Is Variosystems looking at making any investments in India?
At the moment, the company doesn’t have any such plans. We are not looking to make any investments in India because we will start our next factory in Sri Lanka for wire harnesses in June 2016, but we are looking for good partnerships with Indian vendors for mechanical and metal sheet supplies. Variosystems does not just buy components from the vendors; rather, we help to develop our vendors to meet our quality needs, just like the support we get from our customers. This will help to build up a long term business partnership for both parties.
EB: How important is it for you to source the correct component from the right vendor? What is the business impact of not doing this?
It is very important to source the correct component from the right vendor. Not doing so can ultimately lead to the loss of a customer. This is one of the main quality concerns and vendors should maintain consistency. This is monitored by us during vendor evaluation.
EB: What are your plans with respect to investments in capital equipment in the coming year?
Whenever we have capital equipment requirements, we go through our Indian distributors. As I mentioned earlier while we are expanding both PCBA and wire harnessing, we’ll need more machinery and equipment. So we’re looking for good sources from India.
EB: What are the types of electronic components, materials and services that you procure?
We procure almost all types, including active and passive components, PCBs, electromechanical, cables, metal sheet products, enclosures, etc.
EB: Do you follow any specific procedure for vendor enrolment?
When we evaluate the vendor, right from the account opening stage there is a procedure that involves getting the approval from our quality department. So if a vendor has any ISO certification, it could be an advantage. Also, we follow a process by which certain samples have to get approved by going through audits.
EB: What are the typical ‘hard-to-find’ categories for which you could say that vendor development is a challenge?
It is difficult to find good prototype PCBs in India.
EB: How do you find a suitable alternative for a component supplier who leaves the business due to bankruptcy or any other business pressure?
As Variosystems, we are not just buying components. At all times, we try to start partnerships with our potential vendors. While we do the vendor evaluation, we also check their financial ability. To help them develop as per our requirements, we support vendors from the initial stages.
EB: What is your company’s take in situations such as low profit or low sale product line closures by suppliers, which leads to no customer support being offered by them?
We try to keep a buffer stock of such products and, at the same time, we try finding alternative sources through our customers.
EB: How do you combat the counterfeit or grey market?
If we are not sure about the products we are buying from the suppliers, then we ask them to provide the certificates of conformance with all the shipments. Also, before we go forward to buy products from suppliers, we take the approval of our customers, followed by lab analysis.
