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EOL Automation: Pushing Profitability Forward
December 31, 1969 |Estimated reading time: 6 minutes
By Brian Bagby
The advantages of EOL combine to generate an ROI that is more favorable than current automation processes.
How many times has it been said that components and assemblies are getting smaller and faster, and consumer demand is rising while product life cycles are getting shorter? For OEMs, the key to profitability is bringing products to market faster. It is another truism that he who arrives to the market first generally wins. For example, everyone knows that Neil Armstrong was the first man to walk on the moon. Who was second?
Successful contract manufacturers (CM) offer more than assembly capabilities to their customers; they also deliver production speed, low scrap rates and the flexibility to change products on short notice. Take a moment to contemplate the success of CMs. Front-end automation certainly has delivered impressive manufacturing efficiency and speed. Pick-and-place systems, for example, achieve speeds of 100,000 placements per hour. Dispensing systems, ovens, screen printers not to mention the chemistries needed to support these processes have kept pace. Line integration has helped CMs literally deliver the goods on time and within budget. Because of this, shrinking profit margins aside, CMs are now electronics industry leaders in terms of yearly growth and estimated growth potential.
According to a new study from Allied Business Intelligence (ABI), North American CMs will continue to see demand for their services climb, while their bare-board manufacturing brethren are likely to see hard times. While U.S. annual growth for printed circuit board (PCB) manufacturers is estimated to be 2 to 3 percent over the next few years, CMs will see annual world growth of 15 to 20 percent through 2005, according to ABI.
The New Reality
But CMs and OEMs realize that the future presents some formidable challenges to profitability. Profit margins, product size and time-to-market will continue shrinking. There then follows at least two unavoidable facts:
- Front-end automation has squeezed every cent from the manufacturing process. Much to the credit of front-end equipment suppliers, they have spurred industry growth by automating every aspect of front-end productions. But blood does not come from a stone. If CMs are to maintain profitability, they will have to look elsewhere for ways to automate production.
- As product size shrinks, the remaining manual assembly processes must be phased out. Cell phone manufacturers already realize that today's sophisticated assemblies cannot meet cost and quality objectives using manual labor.
The Next Frontier
The current assembly method of driving product through front-end automation and then grinding the process to a halt while assemblies are depaneled by hand or odd-form components are placed and soldered individually at manual workstations, is inefficient, costly and must disappear if the industry is to maintain its 20 percent annual growth rate.
Enlightened CMs, particularly those involved with high-volume, high-technology products, have begun automating the total production process, including the full range of end-of-line (EOL) processes from depaneling and odd-form placement to selective soldering, test handling and final assembly. Today's EOL equipment can take the assembly from the line and eventually place the finished product into a box ready for customer shipment. The process is quick, efficient and fully automated.
Why have some CMs avoided automating EOL processes, and why, in an age of almost total automation, do slower manual operations remain standard practice, particularly among small- to mid-size CMs? In many cases it is a false perception. Some CMs believe that manual EOL allows for the flexibility they need, particularly given the realities of shorter product life cycles. This perception once had a basis in reality. Older automated EOL machines could be cumbersome, slow and difficult to adapt to new products. And while nothing is as flexible as manual operations, today's small-footprint, modular EOL systems are extremely flexible nonetheless.
A second misconception is that, given the gamut of EOL processes, there can be no complete solution no fully integrated line that can handle all aspects of EOL. Again, this belief is grounded in past realities of EOL equipment vendors, but is no longer true. Just as front-end equipment suppliers have automated and integrated the entire process, so, too, can EOL vendors offer totally automated solutions.A third misconception concerns price and return on investment (ROI). The upfront investment in EOL equipment certainly is a cost, but it is minimal when compared to the costs accrued because of slow production, reduced quality and continually higher labor rates all bottom-line expenses related to manual processes.
ROI
Automated EOL can deliver reduced product cost in three ways: shorter processing time, less scrap and reduced labor costs. There also is a fourth consideration often overlooked reduced shop floor space. As the industry continues to expand, many CMs are increasing production by adding more lines and value-added services, but additional lines mean larger facilities and greater costs. EOL equipment does more in a smaller area than do manual operations. Doing more in less space is a smart way to reduce overall costs.
How quickly can EOL equipment return a CM's upfront investment? Typically, payback is between one to 2.5 years. For example, consider the following real-world numbers as they relate to automated odd-form placement. Typically, a single odd-form placement cell can replace up to three manual operators per shift. In the United States, it generally is accepted that the total cost of each operator is close to $14.00 per hour. In the United Kingdom, the figure is approximately £15.00. If a CM is running two shifts per day, the odd-form cell will replace six operators and generate the following labor cost savings:
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Next, examine ROI in terms of savings derived from improved quality. As an example, consider the following typical motherboard:
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If automated odd-form assembly can prevent incorrect insertions created by manual assembly, savings can be achieved (Table 1). These figures do not take into account the additional costs that manual processing can generate extra inventory needed for rework, increased time-to-manufacture and potential lost sales/revenue created by delayed time-to-market.The same approximate figures apply to automated depaneling vs. manual breakout. Replacing a single manual laborer over three shifts equates to a cost savings of $87,360 in the United States and £93,600 in the United Kingdom.
Because of stress-free breakout and reduced manual handling, quality cost savings with automated depaneling also are substantial. Consider a typical PCB with the following parameters:
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With a scrap reduction of 0.1 percent, the annual cost of failure is $40,000. Raise the scrap level reduction to 0.5 percent and the annual cost savings jumps to $200,000.
These figures are a conservative estimate. The numbers will rise significantly if, for example, the additional cost of failure in the field becomes part of the equation.
Conclusion
A series of current industry trends product size and complexity, reduced margins, faster time-to-market, and increased consumer demand continues to work against manual EOL operations. Cost, quality and time ultimately will mandate automated EOL solutions for many mid-sized CMs, just as they have done for the world's largest CMs and OEMs.
The need to remain competitive has driven the total automation of front-end processes so efficiently that it has become difficult to squeeze any more profitability from further front-end automation. Automated EOL is the next frontier. As with any equipment, an upfront investment is required, but cost savings generated by reduced labor, improved quality, faster time-to-market and reduced floor space combine for a relatively faster ROI than the incremental gains currently seen in the front of the line.
BRIAN BAGBY is VP, sales and marketing, Americas, for PMJ automec USA Inc., 2550 114th Street, #170, Grand Prairie, TX 75050; (972) 660-1151; Fax: (972) 660-1106; E-mail: brian.bagby@pmjusa.com.