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Advice on Outsourcing Military Assemblies
April 9, 2007 |Estimated reading time: 1 minute
CRANSTON, R.I. Defense contractors that partner with EMS providers to outsource military and government assemblies can reduce costs and lead time, but face risks beyond typical outsourcing concerns. "Selecting an EMS Partner for Military/Government Applications: Seven Things You Must Know," a white paper released by EMS provider Federal Electronics, advises contractors on the appropriate outsourcing strategy, and the pros and cons of sourcing assembly.
Outsourcing by prime military contractors may exceed $4 billion in 2007, according to Federal Electron's analysts. Defense contractors implementing an effective outsourcing agenda can expand and narrow operations when needed, and forego costly infrastructure and long development times, said Ed Evangelista, the white paper's author. Risks to product quality, customer satisfaction, and cost could rise with an improper outsourcing strategy, he added. The paper advises on determining an appropriate outsourcing strategy, matching business profiles and capabilities with an EMS provider, addressing product mix, enterprise resource planning (ERP), new product introductions (NPIs), and cost variabilities. Evangelista, with 20 years experience in the EMS field, explains the deleterious effects poor outsourcing can have on managing a military contract.
Recently, NBC News reported that contractor ITT Corporation illegally exported plans for a subassembly of American night vision goggles to China, Singapore, and the U.K., as part of cost-cutting outsourcing plan. The U.S. Justice Department is requiring a penalty of up to $100 million, and ITT will admit to exporting the goggles without obtaining a license or written authorization from the State Department. While the particular assembly sourced to these regions was not "core" technology, the violation raised concerns about national security, and demonstrated the risks of outsourcing military contracts.
Modern military products, however, sometimes incorporate commercial off-the-shelf (COTS) assemblies, rather than solely using proprietary subassemblies designed by the military or Department of Defense (DoD). These assemblies, such as a calculator feature within a larger device, are not restricted in the same way that proprietary designs are, and can be sourced without concern of confidentiality and security risks.
EMS providers interested in attracting military OEMs and defense contractors must be aware of the stakes involved for product reliability, intellectual property (IP), and other factors, according to Federal Electronics, and also must consider the costs of sourcing tin/lead components and solders and obtaining military certifications, such as MIL-PRF-31032. The full white paper is available at www.federalelec.com.