2005 - Molex

Molex 2005 Annual Report
L E A D E R S H I P R O U N D T A B L E
liam When you are well positioned with your customers–and we are–they tell you
what equipment they are developing, so we can develop the appropriate products.
Staying close to them is critical, as is participating in international standards com-
mittees.
dave But we all know that value is central to customer service. Customers want to
know they’re getting the most cost-effective price.
martin It’s not far from the truth to say that customers want the product now, per-
fect and free. We need to get as close to that scenario as possible while still making a
reasonable profit. To do that, we have to be strong in the fundamentals because the
vast majority of customer decisions are made on objective factors. Relationships are
not as key as they used to be.
Producing Superior Financial Results
dave Our fourth strategic objective is to generate outstanding financial results. It
encompasses profitability, as well as metrics we haven’t concentrated on as much
before–but that matter to the investment community–such as working capital man-
agement and return on assets.
martin We make the highest profits on new connector products, which are around
30% of our revenue each year. But our integrated products, which have lower mar-
gins, have increased to about 22% of our revenue. The harnesses, cables and other
labor-intensive assemblies we make around the world are growing twice as fast as
connector sales. We have to face the reality of an increasing segment of our business
having lower return on sales, but higher return on assets.
liam We have moved most of our integrated products to low-cost production coun-
tries like Mexico and China, as well as Eastern Europe. That has reduced our labor
cost, but we still need to work on our materials cost.
martin Molex has always been cash rich and willing to replicate capabilities in re-
gions around the world. This has been an advantage in the past, but reflects poorly
on our return on assets. We’re starting to drive a better return on investment through
factory consolidation and improved global logistics. Customers tell us they don’t care
where we make a product, just as long as we get it to them on time. So we don’t have
to be so concerned about manufacturing close to our customers’ plants and we can
have fewer larger factories, often in lower-cost countries.
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