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4.4. Case background – Thermal Management Company
Thermal Management Company (THC) is a manufacturer of PC Cases, power supply and cooling solutions. Its headquarters is situated in Taipei, Taiwan but has a number of manufacture facilities in China as well. The Taiwan company was founded in 1999, and at hte same time the company established its American HQ in California as well. They entered te Taiwan Stock Exchange via IPO in 2007.
The division studied in this paper was the cooling and fan producer. Thanks to their extensive R&D in the area as well as the clear desire to be the market leader, they were able to achieved quite a few success in this area ‐ where in 2000 they were the first company in the world to be able to provide with comprehensive cooling for the Intel Pentium processors and in 2004 they launched the world first liquid‐cooler for CPU`s.
Most of Thermal Management company`s production goes into the global technology channels.
Their main customers are the end customers, who have substantial knowledge and skill so that they can build their own PC systems that will respond to their particular needs and desires. In 2009 they created a portfolio of brands, where all are differently themed (e.g. sporty, luxurious, classic etc) so that the PC enthusiasts can modify their PCs not only based from the technical aspect, but can also change the appearance and design of their computers to their liking. So, in 2010 they were able to introduce the well received and most famous product – the Level 10 Chasis co‐developed with BMW Designworks – to give the user chance to create an computer like never seen before.
This is also one of the main aspects of their corporate culture – the DIY attitude, where they try to provide many innovative and variable products, on the highest standards.
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4.4.2 Architecture
4.4.2.1 ‐ Differentiation
The main business scope of Thermal Management Company (THC), as the name suggests is cooling devices for computers. The most common coolers they offer are the heat pipe and heat sink coolers – the two of more advanced technologies on the field of computer cooling. Coolers are rather important part of the computer – every single part inside the computer omits heat, and some of the PC most important components are designed to shut themselves off once the internal temperature reaches certain maximum in order to avoid serious damage to the components. Also, when designing the coolers, the deesingers must keep in mind the hot air outflow, cold air inflow as well as the air integration inside the PC – which requires certain level of architectural knowledge – the most important would be the size of the components as well as the degree of how much heat these components omit.
Coolers are fairly uncomplicated components, generally consisting of only 3 components – the power source, fan and the cooling device. The most of the innovation happens in the cooling device – in the materials employed as well as processes employed. As mentioned, THC employs two main technology approaches:
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heat sinks, where the sinks, usually of metal with high thermal conductivity (e.g.
aluminum or copper) are placed directly on the component to be cooled. Heat from the relatively small component is being transferred on the larger sinks, causing that the equilibrium temperature of the sink and the component than the component`s
temperature alone would be. Heat is than carried away by an or other similar device. Heat sinks are often glued to the components emploing special glues, thermal greases or adhesives to improve the heat transfer.
Heat pipe is a hallow tub which contains a heat transfer liquid. The liquid absorbsheat at one end and evaporate at the other end of the pipe. A heat pipe is a hollow tube
containing a heat transfer liquid. The liquid absorbs heat and evaporates at one end of the pipe. The vapor travels to the other (cooler) end of the tube, where it condenses, giving up its latent heat. The liquid returns to the hot end of the tube by gravity or capillary action and repeats the cycle. This approach is much more efficient than using solid materials ever would be.
As we can see, the component and process input from the suppliers might be crucial. Still, since the number of the components (differentiation) as well as the connectivity is usually based on gluing the cooling device on the particular components – there is no extra need for any special interfaces or communication gates and the connection is basically sequential, with th heat flowing from inside the component through the cooler out – the overall product architecture may be defined as simple, low.
4.4.2.2 Time to Market
The time to market is critical issue for Thermal Management Company. There is great deal of innovation happening in the area of component innovation – in the game of increased hardware performance, often at the expense of heat management. This means Thermal Management Company must come with new, smaller and even more efficient coolers.
In addition, their business scope can be described as B2C – their customer is the PC end user.
The strategy they employ is DIY – the growing group of users who upgrade their computers based on their needs instead of buying PCs ready to use from the assemblers (such as Dell or Asus). Therefore product variability and newness are a big issue here – the development times as well as time to market are short here (less than a year) and there is huge pressure on suppliers to deliver what was promised on time. This means the product newness is relatively
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high, even though there are mainly improvements and revisions to existing products with occasionally appearing new product lines (in case of new cooling media).
4.4.2 Buyer‐supplier relationship and NPD
4.4.2.1 Supplier segmentation
Thermal Management Company `s relation to suppliers is more rigid than SANAV`s but still not that cultivated such as of ASUS or ADVANSUS`.
All the existing suppliers, who are on the list would be managed trough the procurement. The procurement does decide who will stay on the supplier panel list and who will be removed. It is usually the procurement unit who will also search, screen and also add new suppliers to the list.
It can happen, although it is quite rare, that an supplier will be recommended by the product engineer – based on their cooperation history, but also due to promising technology possessed by the supplier etc. In such a case, the engineer still has to recommend the supplier to the procurement unit who will evaluate whether to add them to the list or not.
The evaluation process is long and tough – where the procurement will check on all the costs, quality, business size, speed and also price. Another consideration is why was (in case) the supplier recommended – isn’t there any extra incentive for the engineers and what will be the final control over the component sourcing and both technology as well as business risks connected?
It is only those suppliers on the list, who might be awarded with any sort of contract or
consultation on new product development. No one else has the right to decide on the suppliers, regardless of the preferences than the procurement– although the engineers can go and
discuss about new supliers with the procurement who might take those into consideration.
Once approved, however the supplier`s position improves significantly – especially if there is
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The main factors that will decide on what suppliers to be involved are the development and delivery speed and cost – where the cost is the major decision factor out of these two. This means if there is an option to develop new component faster, but for significantly higher cost – they would choose the cheaper option. On the other side in situations when both components are about the same cost, or even with some acceptable price difference but the supplier can deliver the needed solution faster – they would choose to go with them due to the short development time and fast time to market times.
We can see, that the relationship between suppliers and Thermal Management Company is not that warm as in case of ADVANSUS or even Asus. It can be merely described as an arm‐length relationship managed by procurement. In special cases, when they need to involve suppliers, they would do so primarily based on the previous experience and evaluation of the main indicators specified.
4.4.2.2 Supplier roles
Thermal Management Company does not specify any supplier roles for their suppliers. They manage them all as equals – it is not that long since Thermal Management Company was cooler component manufacturer themselves, and they still have good understanding of their supplier pool based on this experience. Therefore they don’t need to create any roles on how to divide suppliers based on their technology importance.
4.4.2.3 Goal setting and planning and influence overlapping
Thermal Management Company do their own marketing and therefore would have quite good understanding of the user markets – but they must be also able to predict the trends in other components and what direction are they heading – between what trade‐off will the PC component manufacturers choose –either lower heat or increased computing power?
Based on the market need, they do create product concept which will be later presented to their suppliers. They have very good idea of what they want, but they might not always be very sure about how to achieve these – especially in the case of new materials usage or how to use these materials in new or improved processes. In general they create the plans which they will present to the customer and than will discuss about what problems do they face. Mr. Qin said:
“We would listen to our suppliers on what are their creative solutions to the problem. However we always consider the price to innovation ratio. If the price is too high for that, we won`t go with that solution. The same applies for the speed.”
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Once they have a good idea how to solve the design problem, they will set the clear specs to everyone and make sure, that all the suppliers follow these guidelines. In case they don`t, or the solution is not good enough –Thermal Management Company will ask their suppliers to redo and provide them with solution that would work.
4.4.2.4 Reasons to invite suppliers
The main reason to invite suppliers is to optimize their products, followed by price cutting considerations. Anytime there is an supplier, who can provide with an solution that is
acceptable for quality but for cheaper price – they will always go with that option, abandoning the old supplier if they can`t lower their price to the new level.
4.4.3 Timing
Suppliers are invited during the concept phase – this is when Thermal Management Company will disclose the details of their plans to them. It never happens that suppliers would be invited earlier, but it is quite common that supplier will be invited later – especially for components where they change the source (for cheaper components) or if the supplier cannot deliver the solution they asked them to do – than they will need to contact new supplier who will step in and take over the unsuccessful supplier`s task. The always try to avid this situation to happen – as that would significantly increase their risks, but it still might happen – since the supplier`s cost consideration of higher importance than technology capability.
4.4.4 Management alignment
The top management will not interfere with the development work – they will delegate this to
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keep the controlling role over the project and merely oversee the efforts – but won`t interfere or provide any direct leadership support to the teams.
When working with the supplier, the main connection between the two companies are the line engineers, who exchange information either by email, phone calls or regular visits. Also, they do have regular weekly development meetings – where the supplier`s representative is present to point our issues and solutions to the problems they are currently working on.
There is some degree of flexibility before the final specs are agreed by the top management, but due to the fast nature of the development time, there is not much space for deeper discussions and changes during the development time itself – the ability to develop products fast is on the expense of the democratic nature of exchange – since there is no time for that whatsoever.
4.4.4.1 Degree of knowledge sharing
Thermal Management Company does not share much knowledge with their suppliers. It is only few years, since they decided to go outsource their manufacture – due to the cost
consideration. Were it not for this, they would stay vertical and manufacture all the
components necessary by themselves. This means they have rather excellent understanding of component knowledge and are able to employ this knowledge during the NPD process.
Also, as a consequence of outsourcing, they did move up within the value chain and they will keep their hard won architectural knowledge for themselves not exposing it to anybody. Still, they do understand that the suppliers may need such a knowledge – but they expect, that the suppliers will try to learn such a knowledge by themselves, for example by reverse engineering etc.
Therefore it is safe to conclude, that the degree of knowledge sharing is low.