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Inside Germany
What About Germany?

By Volker Feyerabend

—Posted: 03/01/2003

We Germans often discuss Asian economies, and yes, we sometimes refer to Asian PCB makers as "yellow dragons." This, however, is not so much a derogatory term, but rather a grudging acknowledgment of our inferiority; it's hard to fight dragons.

While Asia didn't invent globalization, it has adapted to this process to its advantage much more successfully than Germany. For example, the German PCB industry will shrink by approximately 25 percent, order entry is down by 6.5 percent, and PCB industry employment will drop 15% (compared to last year).

Some people say our political leadership has proven too faint hearted to implement the reforms necessary to make the German economy competitive in the face of new challenges. The German public is to blame as well. It has not yet shown sufficient willingness to let go of certain luxuries that the current situation affords.

However, there are exceptions. Companies also exist that have seen the challenges, faced them, adapted and whose success hopefully will inspire others to follow. What makes these German companies successful? They all share the same mindset, with the following characteristics.
In large parts of the world, these notions are common knowledge. In Germany, unfortunately, this is hot stuff. Here are three examples of companies who have adapted to global change.

EMS Company Zollner (with approximately 5,000 employees) built factories in Eastern Europe (Hungary 1988 and 2002, Romania 2001) to provide the customer with low-cost solutions. Its approach has been to build prototypes in Germany, and transfer regular production to Eastern Europe. In addition, employees from Eastern Europe receive thorough training in Germany, where they are familiarized with all methods of enforcing strict quality control mechanisms. Thus, EMS Company Zollner in Hungary and Rumania provide customers with the same level of quality, service and know-how from their sites. The company's "one-stop shopping" strategy includes horizontal manufacturing services (EMS, sheet metal, inductive components) and vertical offerings from R&D, Production, and Logistics to After-Sales Services. Diversification is another key strength of the company (different business sectors, type of volumes, customers and technologies). Together, these strategies paid off. Instead of losing business to Asia, the company won additional customers, increased sales and invested more in Germany.

Some other players started to focus on lower volume, higher mix production and OEM relationships with engineering support. PCB manufacturer KSG GmbH (approximately 27 million deutsche mark turnover and 250 employees) is another success story. During the recent economic downturn, KSG grew strongly, added new capacity in Germany, and plans to increase investment over the next several years. What's its secret? First, customer relationships; second, customer service; third, a long-term strategy; fourth, the right technology mix; and finally, a well placed investments at the right time. You will also find diversification in business sectors, customers and technology. What's so unique about that? Simple. They have the right mindset, and they always execute.

Some equipment manufacturers are investing in Asia to provide their customers with a lower cost solution, and to be close to the customers. But isn't there a know-how risk in Asia? Just accept the fact that the locals will have very soon built up the industry know-how anyway. KSL Kuttler Automation Systems (maker of handling systems, with 155 employees, 25 million deutsche mark turnover) proactively manages the change to provide customers with a superior level of service. By being flexible, offering market orientated designs, excellent after sales services, and a structure and company culture which allows very fast decisions and implementations, the company is making money. Early on, it recognized the fact that Asia would gain importance in the PCB/ electronic industry. In 1992, KSL started with a salesman in Asia, but by 2002 it built up a production site in China (Suzhou, now 68 local employees) which designs, develops and builds new products (wet processing equipment) since July. The China site is part of its diversification strategy. The approach is to offer synergies with its existing portfolio, which can be expected to have positive effects on its German production.

It seems like in all levels of the supply chain one can find companies with the right strategies, the right products/services, and the right costs in place to be successful. This should be cause for optimism in making the right strategic decision today. If you'd like to discuss this further, please contact me.

Volker Feyerabend is President of APROS International Consulting ( He has a degree in Engineering and Economics. He has worked for Hewlett Packard, Agilent Technologies, Groz-Beckert in various international senior management positions. He also headed a European Outsourcing Organization with the focus on EMS/ PCB companies. Contact him at

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