You Made The Decision.. Now What?
Your company is facing one or more of these situations and has made the decision to outsource the manufacture of electronic circuit board assemblies, control panels and/or box-build assemblies.
Company dictated outsource initiative
Ever-changing technology makes it difficult keep manufacturing practices current
Loss of in-house expertise
Cost reduction effort to improve bottom line
Other companies who outsource electronic assembly manufacturing and your suppliers are excellent sources of information and referrals. A personal referral of an electronics manufacturer is a great place to start. Internet searches provide many opportunities as well.
After you have selected a few manufacturers as potential suppliers, your outsourcing teams visit prospective electronic manufacturing services providers and select the preferred contract manufacturers. The top choice most likely earned that rank because their manufacturing processes met the quality and process requirements set forth by the selection team. This potential supplier also "fits" with your company's business needs. The ability to absorb product changes, demand changes and other unexpected requirements are just as important as product quality and process capability.
Finding The Right Fit
“Fit” cannot be emphasized enough. The contract manufacturer of choice should excel in the quantity range and assembly technology of your designs. For instance, a high-volume manufacturer may agree to build prototypes, but is only doing so for the opportunity of high volume electronic assembly. If your business is requires small volume assemblies and prototypes, a high-volume contract manufacturer will not fit in the long run, leaving you both disappointed.
Next comes some amount of sticker-shock when the quote is prepared. Many OEM's are shocked when they receive a quote on a product that has been built in-house. Usually this occurs when the outsourcing company compares the direct costs to make assemblies in-house to the price supplied by the contract manufacturer.
Things To Consider:
To make an accurate comparison, the outsourcing company should carefully consider the following overhead:
Supply chain overhead required to purchase and process each component on a bill of materials. Each component has to be cared for physically and in the ERP system. Also, include the cost of obsolescence.
Cost of capital tied up in inventory and physical requirements.
Factory overhead required to support the manufacturing floor. One belief, that these people will be there anyway so they do not count, needs special consideration. The trade-off is the opportunity cost of the required support. These people could be supporting other, perhaps core initiatives if they did not have to support internal electronics manufacturing. If these people work overtime, the opportunity cost becomes much higher.
General overhead costs such as benefit packages, taxes and related expenses.
Once the outsourcing company reconciles any pricing questions with the preferred supplier, it is time for a trial order. Trial orders are wonderful tools for both companies to work through questions and issues related to the businesses in general or in the specific electronic assembly. There may be components to use up at the outsourcing company, test programs to work through and other assembly-specific questions.
As the relationship progresses, communication on both sides is key. Regular, open discussions will keep the relationship healthy and successful.
To find out more, check out this great article from Industry Week about successful outsourcing of manufacturing and let us know below the successes your business has had when outsourcing your electronics assembly manufacturing. For additional information regarding partnering with RBB Systems, contact Bruce Hendrick directly.
With over 25 years of experience in the custom electronics manufacturing field, Wendy uses continuous improvement tools to achieve strategic objectives. Wendy also serves as board member and treasurer of the local Humane Society.