Advanced Circuits Inc.

Advanced Circuits Inc.

21101 E. 32nd Parkway
Aurora, Colorado 80011
U.S.A.
Telephone: (303) 576-6610
Toll Free: (800) 289-1724
Fax: (303) 418-2334
Web site: http://www.4pcb.com

Private Company
Founded: 1979 as Seiko Circuits
Employees: 250
Sales: $36 million (2004 est.)
NAIC: 334412 Printed Circuit Board Manufacturing

A private company based in the Denver suburb of Aurora, Colorado, Advanced Circuits Inc. is one of the nation's few thriving printed circuit board (PCB) manufacturers. While most PCB manufacturing is now done overseas, Advanced Circuits has found a niche by specializing in the quick turnaround of engineering prototypes and limited production runs, the kind of jobs that the larger offshore PCB manufacturers are not suited to service. A PCB is a thin plate containing chips and other electronic components. A typical computer includes a main PCB, the motherboard, as well as smaller expansion cards, adapters, controllers, interfaces. To ensure that a PCB works as intended, designers turn to Advanced Circuits to produce prototypes for testing purposes. The company has a solid reputation as a reliable vendor in its field, boasting an on-time or early delivery rate in excess of 99 percent. As a result, Advanced Circuits has many loyal customers, including major companies such as IBM, Apple Computer, Lucent, and Texas Instruments. The company is more technically advanced than the competition, and has for several years provided quotes over the Internet. More recently it launched FreeDFM.com, a free Internet-based program that allows engineers to check designs for flaws that could lead to unnecessary delays in manufacturing. In addition, the program provides a quote to help drum up new business. Advanced Circuits also has succeeded in developing an attractive company culture and enjoys a 98 percent employee retention rate, one of the highest in its industry. It has a solid reputation for complying with state and federal environmental regulations, a problem for PCB manufacturers, which work with a number of toxic chemicals.

A Failed Company in the 1980s

Advanced Circuits was established in 1979 as Seiko Circuits but ten years later was going out of business. A pair of brothers-in-law, Ron Huston and Paul Bustabade, entered the picture to bail out the business. Huston, 25 years old in 1989, had earned a degree in electrical engineering from Wichita State University and moved to Los Angeles to work as a design engineer with McDonnell-Douglas Corp. After he was on the job four years, Bustabade called him from Colorado to tell him about an area "board shop" that they might be able to pick up on the cheap. Huston flew out to find a two-layer fabrication operation located in a 5,000-square-foot garage. The business lacked a computer or even a fax machine, but it had enough serviceable equipment that Huston and Bustabade decided to make a lowball offer, which to their surprise was accepted. They turned to family and friends to raise the purchase price, renamed the business Advanced Circuits, and with just one other employee went to work for themselves.

The early years were difficult. The partners' only goal was mere survival. Huston wore any number of hats, sometimes on the phone as salesman and often in the back building boards with Bustabade. In addition, he acted as head bookkeeper, chief operations manager, and collections manager. The company offered customers a 1 to 2 percent discount if payments were made within ten days, but they had to allow a person to pick up a check to make sure the money was received quickly. In the first few years Huston personally retrieved local checks. A courier service was employed for out-of-state clients.

Changing Conditions for PCB Industry in the Early 1990s

PCB manufacturers located in the United States were starting to be squeezed out of the market by offshore companies, particularly in Taiwan, that could take advantage of cheap labor. The situation was exacerbated by a downturn in the economy that crippled the PCB industry in 1991 and 1992, just as Advanced Circuits was beginning to establish itself. During this period the number of domestic board makers fell from 2,500 to just 700. It was in 1992 that Advanced Circuits reached a major turning point. The company either had to learn to adapt to business conditions or perish. Huston recognized that the company could take advantage of its location to offer faster service to U.S. customers. Overnight delivery of PCBs made in Asia took at least two days, and at the time at least one week was needed to complete a project on a quick turnaround basis. Unable to compete on larger contracts with long lead times, Huston concluded at the beginning of 1992 that he could drum up business if he could offer three-day turnaround, something that was impossible for larger board makers due to their high set-up costs. Moreover, because there was no language barrier, Advanced Circuits would be able to offer personalized service.

Over the course of the next year, Advanced Circuits reorganized its production routines to minimize the amount of time a board lay idle. While a project might only require 20 hours of manufacturing, it could sit unfinished for several days. The first step the company took was to institute batching, so that a number of jobs were combined in the same production run. Not only was time saved, but the use of materials was optimized, leading to lower costs that could be passed on to customers in the form of savings. Next, as he recounted in an article he wrote for Logistics Today, Huston "spent the entire month of July spreadsheeting. My living room was covered with spreadsheets experimenting with every possible combination of lead-time, order size and engineering assumptions (based on three jobs per batch). My objective was to discover the optimum combination of lead-time and order-size variables that could be priced attractively and be of no interest to big offshore providers." His conclusion was that Advanced Circuits should concentrate on prototypes, which were needed quickly in limited quantities and often required clarification on design specifications, a factor that played to the company's advantage in language compatibility. In the words of Huston, "We stopped fishing for whales and started fishing for minnows."

In November 1992 Huston mailed out some 5,000 brochures to potential customers, pitching Advanced Circuits' quick turnaround, promising that boards would be delivered on time or they were free. To make the offer even more attractive, the company accepted credit cards for the work. The response was immediate and strong: the telephone began ringing with new orders, making it necessary for Huston to hire his first sales associate. To achieve success with its new strategy, Advanced Circuits eventually broke down the manufacturing of PCBs to 20 processes. Although automated, they were complex and required oversight. The status of each order, where it was on the shop floor and how it stood against the deadline, was closely monitored. At the start of each day product managers and senior managers took stock on where they stood with orders.

Advanced Circuits began a string of profitable years, as it continued to exploit gaps in the offshore PCB manufacturing business model. The making of prototype PCBs accounted for 10 percent of the company's business by the end of 1993, an amount that would reach 50 percent a decade later. The rest of the company's business was in limited production runs. The sweet spot for the company's success lay with orders of ten units or less needed within a week.

As Advanced Circuits grew, it hired an increasing number of people, and Huston displayed an innovative way to manage people that resulted in company loyalty and an extremely low level of employee turnover. He was good at establishing goals that, if met, rewarded employees, sometimes with money and sometimes in less tangible ways. In 1998, in order to increase daily sales from $28,000 to $30,000, he promised each of his eight sales people $50 cash each week that they achieved a daily average above $30,000. The goal was met in the first week. A year later, he devised a more flamboyant way to improve production. He had a $200 car hauled into the parking lot along with a sledgehammer. Every day the employees could bludgeon the car if they had no redo jobs. The goal was to flatten the car in three months. It was a fun diversion, but seeing the car as employees drove into work was a visual reminder about the company's emphasis on quality control. When the company hit a sales ceiling, unable to crack the $1 million mark in monthly sales, Huston promised to take employees and their families out to lunch once the ceiling was pierced. The very next month sales totaled $1.1 million and Huston picked up a $7,000 lunch tab. A more traditional incentive was the company's profit-sharing plan instituted in 2002, that was more than generous for a business its size. By meeting sales and productivity goals, employees received a 5 percent monthly bonus, plus performance bonuses awarded three times a year. As a result, employees received an additional 20 percent of their salary over the course of a year. Having a highly motivated workforce paid off in other ways as well. When employees were surveyed in 2004, many complained that management was too slow to fire nonperformers. Thus the drive to create an even more productive workforce was being generated from the bottom up and allowed management to weed out poor performers with the blessing of the group.

Business grew so steadily in the 1990s that Advanced Circuits became overwhelmed by the number of requests for quotes by phone or fax. The company turned to the Internet, becoming the first in the industry to bring online instant price quoting, ordering, and order status capabilities to the Web. The demand for its services became so strong in 1999 and 2000 that one of the greatest challenges facing the company was capacity management. Rather than raise prices to ease the pressure, Advanced Circuits decided instead to reexamine its operations. It identified bottlenecks in both the design and manufacturing areas and took steps to manage capacity issues by simply building boards faster.

Company Perspectives:

We manufacture high quality printed circuit boards—exactly to your specifications—surrounded by an awesome customer experience.

Avoiding Industry Fate Early in the New Century

The early years of the new century, troubled by a recession, were another difficult time for U.S. PCB manufacturers. From 2001 to 2003 the number of PCB makers was reduced by another 40 percent. Despite conditions that devastated the tech sector across the board, Advanced Circuits found a way to continue its pattern of growth. In fact, from 1998 to 2002, the company grew sales by 237 percent, and in 2003 it built a new 62,000-square-foot office and manufacturing facility. Several months into the recession, when Huston concluded that the downturn was so steep that the company could not afford to simply ride it out, he called together his senior managers to plot a strategy. What they quickly came to realize was that the company needed to continue using the tools that had made it successful in the first place: speed, quality, innovation, and culture. As long as it could turn out boards faster than airplanes could travel from Asia to the United States, the company would have ready customers no matter what the economic conditions. In addition, the workforce was already highly motivated, leaving quality and innovation as the areas that required some focus.

The management team came to realize that what hindered quality and cost time were problems that occurred at the start of a project, caused by fundamental design flaws that had to be addressed either before work began or later, when unnecessary delays resulted. Advanced Circuits devoted two years to developing a Web-based design-for-manufacturability (DFM) review service, providing design rule checks. The idea had been kicking around for some time, but only now did Huston free up IT and engineering people to concentrate on the task of developing the program, taking advantage of the Web capabilities the company already possessed. The way it worked, designers could send files for each layer of a board. Potential manufacturing problems that resulted in unnecessary production delays and frustrated designers were discovered. In this way, Advanced Circuits made designers look good with their customers while lining up new business for itself. Each evaluation came with a quote for building the submitted design. The program was dubbed FreeDFM and came online in October 2003. It was well received by customers, and because of its use less than 2 percent of orders were held up because of a design flaw.

Advanced Circuits grew revenues from an estimated $28 million in 2003 to $36 million in 2004. Given its advanced capabilities and reputation for speed and reliability, there was every reason to believe that the company would continue to enjoy long-term success.

Principal Competitors

Custom PCB Manufacturing Inc.; PCB Fab Express.

Key Dates:

1979:

The company is founded as Seiko Circuits.

1989:

Ron Huston and Paul Bustabade buy the company, renaming it Advanced Circuits.

1992:

The company focuses on building prototypes.

1998:

Internet ordering begins.

2003:

FreeDFM is launched.

Further Reading

"Change Is Good," Manufacturer, June 1, 2004.

DiBattista, Laurie, "Huston Expanding Advanced Circuits," Denver Business Journal, June 9, 2000, p. 4B.

Freeman, Diane, "Aurora Firm Running on Circuits," Rocky Mountain News, May 17, 2004, p. 6B.

Huston, Ron, "Fishing for Minnows," Logistics Today, May 1, 2004.

Sloane, Julie, "The Best Bosses: The Number Cruncher," Fortune Small Business, October 1, 2004.

—Ed Dinger