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Successful Electronics Outsourcing: An Old Concept with a New Twist
December 31, 1969 |Estimated reading time: 4 minutes
By Joe Zaccari, Stilwell Baker
In a continually contracting environment, many OEMs are experiencing significant challenges in outsourcing product manufacturing. Inability to outsource manufacturing efficiently without outsourcing some of the engineering tasks associated with a design has become prevalent. Moreover, in the case of large OEMs, outsourcing manufacturing often leads to shedding of manufacturing engineering resources, leaving the OEM engineer in a supporting role in the manufacturing process. How can an electronics OEM transition designs to volume manufacturing with the least amount of risk?
Experience has shown that expecting the OEM design engineering resource to support outsourced manufacturing, prototype, and volume is inefficient and disruptive. Design engineers spend as much time supporting "released" designs as they do on new products. The negative impact manifests itself in a variety of ways. Time to market for new products is longer as the design engineer multitasks. Prototypes get functional focus from the design engineer, but lack robust design for excellence (DfX) and cost reduction attention. Production ramp times are stretched out as iterative changes are made to the design to address DfX and regulatory concerns. Per-product costs in volume are artificially high as the choice between new product development and released product DfX decisions increasingly go to the new product.
One place where OEMs look to help alleviate this problem is with their EMS provider. While vertically integrated EMS companies exist, they are not the solution for a large number of electronics OEMs because of volume and technology issues. EMS companies face familiar problems as they offer integrated engineering services. How do you staff to support the range of technologies OEMs use? Effectively communicating with the OEM R&D organization is challenging at best; time zone and language issues have an all-too-familiar impact.
How can an electronics OEM transition designs to volume manufacturing with the least amount of risk? One solution is to partner with an engineering services provider that can fill the void between R&D and manufacturing. This can be considered virtual vertical integration (VVI) or integrated prototype development (IPD). Time-to-market and production ramp times are improved significantly by inserting a team of engineering and manufacturing experts early on in the product development process with the mission to produce a design optimized for manufacturing.
The IPD can shorten production ramp times by implementing production and regulatory requirements at the prototype stage. Eliminating the DfX-driven design spins after functional verification and leveraging the lessons learned during prototype development can deliver results for a seamless transition to volume production.
This is in direct contrast to the rapid prototyping design methods that have been popular as a means to get to a functional design quickly. The problem with rapid prototyping is that designs can progress to an advanced stage of functional completion that manufacturing requirements cannot accommodate easily without causing major redesigns. For example, additional PCB layers might be added to ease layout concerns. When the design is released to the manufacturing partner, the cost of the additional layers can negatively impact product costs and margins.
Another factor that makes implementing DfX considerations earlier in the design phase easier is that more modern design technology has become generic. The expertise required for implementation is readily available from engineering services providers. In fact, many service providers have broader experience than an OEM's engineering team. This makes the cost of maintaining in-house expertise for many engineering functions high relative to the use of outsourced engineering services.
Specialists in each phase of design bill of materials (BOM) development & management, PCB layout, DfX are becoming increasingly efficient by making the cost and quality disadvantage of over-the-wall outsourcing unnecessary. The consumer electronics industry is seeing this with the recent resurgence of HP in the PC market. This resurgence is being driven in part by a focus on design, not shaving costs after product release. IPD can facilitate this design focus by offloading the entire design burden from the R&D staff.
ConclusionThe days of blanket outsourcing have come to an end. Trade publications, Websites, and blogs are full of articles across a wide range of industries describing the problems that surface after the initial cost-reduction euphoria subsides.
In the ideal, vertically integrated model, product design, PCB layout, and EMS are not three serial processes but a single integrated unit made up of three components, more akin to a single project than three discrete and independent processes. To achieve this in today's electronic product development environment, find a broker or facilitator. This is someone that connects these three disciplines to emulate a vertically integrated organization effectively.
The value is around starting from the production requirements and working backwards, instead of starting with an engineered piece of hardware and then redesigning it to make it producible.
To compete successfully in the global electronics market, OEMs need to fill the void outsourced manufacturing leaves between engineering prototypes and manufacturing. OEMs also need to focus their EEs on high-level product research and design tasks, not on the outsourcing burden. By using an integrated prototype development process, where the phases of product realization, design, layout, and manufacturing work in unison, electronics OEMs can achieve this goal.
Joe Zaccari, VP, Stilwell Baker, may be contacted at joez@stilwellbaker.com.