Site selection and global supply chain operations

When Komag, a leading supplier of thin film discs for the electronics industry focused on expanding its operational footprint, the North American Company headquartered in Silicon Valley identified four decision criteria important to the success of its near and long-term global business objectives: good people, cooperative foreign government, competitive cost, and proximity to customers and suppliers. The Company then developed a list of countries for consideration. That list included more traditional choices for technology executives such as Mexico, China, Malaysia, Ireland, Singapore, and Costa Rica. Komag's list also included Thailand, Indonesia, Philippines, Vietnam, and India. People Recognizing the importance people play in the success of any business, Komag felt it was important to consider nations that could provide a consistent source of available labor, at a reasonable cost, that is also English speaking. Komag also wanted to select a country with a high literacy rate and a population that could help to meet the Company's growing demand for technical talent while also enhancing the Komag culture already blessed with a good work ethic. A workforce that welcomed learning and training also rated high as desirable people traits. "Good, committed people are the key", says Komag CEO, Tim Harris. Government Komag was not interested in just finding a plot of ground to erect walls and hoist a corporate logo above the horizon. The Company was looking to invest considerable time and money in technology and its future and also wanted to be able to develop mutually-beneficial partnerships with all levels of government in the country selected. What Komag was looking for was a foreign government pro-actively involved in helping to promote quality education and technical institutions within its borders that could translate this firm commitment into a highly-trained pool of human resources from which the Company could select from for its regional workforce. The company also wanted a structure where the national and the state and local governments were all coordinated and cooperating toward a common goal. Added to this wish list was favorable business tax advantages for FDI (foreign direct investment) and economic stability in the region; transparent rule of law for judicial dealings, and public and private sectors promoting a desire for continuous improvement of the nation's infrastructure. "We also needed adequate highways, seaports and airports" says Harris. "Corporate investment guarantee agreements and protection against nationalization and expropriation as well as the ability to transfer for free also surfaced noteworthy attractions", he adds. "We need to be in an environment where the infrastructure is continuously improved. Komag thrives on continuous improvement and our suppliers must, as well." Costs The media industry, as the semiconductor industry can be very energy intensive. It relies heavily on good, uninterrupted sources of power and clean water. In addition to clean water and reliable energy, Komag also recognized the importance of compatibility with foreign financial and banking support institutions with international monetary bodies. As its global search ensued, the Company located in one nation what it regarded as relatively inexpensive industrial land already in region with designated industrial parks. High-level discussions would soon reveal the Company would not be slapped with import taxes for expensive capital equipment and raw materials intended for its manufacturing. There would also be no export duties. Proximity to Customer and Supplier Importance of proximity to the Company's rapidly growing markets and the developing markets in the Asia Pacific region did not go unnoticed. The Company also recognized the role ancillary industries play in helping support its manufacturing, design, and development activities and wanted these to be located nearby to help in the creation and sustaining of a healthy ecosystem with suppliers, customers, and local communities. And the winner is... "Malaysia offers a friendly business environment", says Harris. The Company has deepened its relationship with the country over the years and now has facilities in Penang, Kuching, and Johor Bahru. "We've been in Malaysia for thirteen years now and and these sites have been outstanding for us." VentureOutsource.com, May 2007