Foxconn's Ecmms Case

1 Questions

1. How do you evaluate Foxconn’s eCMMS model?

2. What are the key drivers of competitive advantages of Foxconn and how Foxconn achieve lower cost?

3. How sustainable is this Foxconn’s business model?

4. Should Foxconn relocate in inland cities such as Zheng Zhou in Henan provience? What are the key considerations in making the plant’s relocation decision?

2 Content

Q1 Answer:

Foxconn’s eCMMS stands for e-enabled Components, Modules, Moves and Services. eCMMS is the vertical integrated one stop shopping business model by combining electrical, mechanical and optical capabilities altogether. It covers solutions ranging from molding, tooling, mechanical parts, components, modules, system assembly, design, manufacturing, maintenance, logistics ... etc. The company mission of Foxconn is defining itself as a service company emphasizing on eCMMS is the core tool to achieve this goal. The root of eCMMs is mechanical component manufacturing capability -- fast tooling, precision molding and quick turn around to fit our customers' specific requirements for components made of different materials, spec, sizes, etc. Therefore, Fozconn is able to give speedy, good quality of product, engineering service as well as flexibility. eCMMS operation model can optimize the company’s value chain, hence achieve cost saving for Foxconn.

Q2 Answer:

The key drivers of competitive advantages of Foxconn are eCMMS model, continuous cost down culture, leading industrial engineering (IE) technology and strong support from local government. The eCMMS model is already evaluated in Q1. The investment in industrial engineering helps Foxconn to reduce the manufacturing cost and gain remarkable profit margin over its competitors. While the local government offers special policies on taxation, land supply and labor employment to Foxconn. All these preferential policy increase the cost advantage of Foxconn directly.

Let see more on how Foxconn keeps low cost. Foxconn believe that through cost down, the profit margin can be leverage. There are two aspects Foxconn focused on controlling cost. One of them is product cost, while another one is operation cost. Foxconn analysis the area of product cost and tackle them one by one. The costs include material cost, processing cost, testing cost, packing and transportation cost, quality cost, inventory cost and fixed cost. Foxconn reduce these cost by three factors. First is by economies of scale to reduce purchasing cost. Second is the design and process technology to produce components for company’s use without reling on suppliers for certain critical parts. The last one is value engineering and value