|AOI is just part of the mix; any off-shore manufacturing partner must be able to provide the same kind of expertise and QC as the domestic operation.
Whether you are an OEM or a domestic EMS provider, one inescapable truth faces us: off-shore assembly is now a part of today's business plans. We might not like to hear it or read it, but it is a fact of life today. Any company needs lower costs and larger margins if it is to succeed. This is how today's economy works.
Domestic EMS providers are pulled in many directions by their customers. The customers are always seeking lower cost and different options to reduce cost. Having a both domestic offshore EMS partners means that an OEM as well as EMS providers can find a low-cost manufacturing option that works. It also allows for redundancy, backup in case of production issues, and allows the domestic EMS to mix and match assembly and pricing. Domestic EMS companies also can concentrate on projects that would provide more or higher revenue.
The question is, at what point do we start moving manufacturing and technology beyond U.S. borders? At what point does maintaining "Made in U.S.A." operations become an impediment to the success of a company?
To make the decision to transfer this wealth of knowledge, the production line, and possibly the company's future existence, there are some general steps that should be taken before throwing the switch.
First, define the reason or reasons and establish the philosophy for going off-shore. This will make it easier to explain "why" to your internal personnel; understand if this is a cost reason or a customer demand; and define exactly how this is to be achieved — establishing a partnership with a source, or moving the tasks off-shore and setting up a subsidiary there, or purchasing a company. Whatever the reasons and philosophy, always communicate, act with integrity and — above all — be honest. The majority of failures occur because the OEM or the domestic EMS and the source were not honest with each other. Do not be bashful about how you want things or how things should be, but also do not be obstinate. Business is always a two-way street and the saying "I'll scratch your back if you scratch mine," is the way it's done.
Due Diligence Needed
Second, know thy source. Do not link up with a source because of a relationship or a recommendation. Visit the place, walk the site and meet with the company. This is the only possible way to get to know the source and its resources. Also, building a personal bond with key people in the source organization will definitely provide an advantage. This way you know who to contact when you need to. Performing a search and due diligence, will go a long way toward selecting the correct off-shore source for your company.
Spend the time and money to meet with the source. Ensure they have the capability, technology and capacity during your meeting or visit. Make sure the source wants to do business and it fits your company's needs. It does not make sense to partner with a high-volume shop when you cannot offer high volume. It does not make sense to partner with a high-tech shop if you have simple SMT devices with through-holes.
Third, define your requirements up front. Do not wait until business starts and product is being assembled. This will prevent issues like the assembly does not meet specification, the product was assembled incorrectly or the component parts were swapped, etc. This up-front defining will alleviate confusion, queries, concerns and headaches — unless you like getting calls at 2 a.m., every day, every week, every month, etc. Define which specifications need to be met, especially the customer's, how to assemble the product, how to inspect and test the unit, and what is required for shipment. The idea here is to prevent holdups and line stoppages.
Defining the requirements will explain exactly what the company wants and what the source needs to abide by. It also will determine if the source can meet those requirements. This way, there will be no questions later, and it will reduce any confusion. Simply informing the source to abide by the specification will end a lot of issues, queries and misunderstandings.
Please note that defining the raw materials sources is critical. The raw materials must be stable in design as well as quality. Some incoming inspection may be required, but for the most part ensure that the raw materials are stable and the material sources are reliable, consistent, and provide quality materials.
RMAs in the Mix
It's important to ensure that there is a robust RMA (Return Material Authorization) procedure. It will speed things along when issues arise at a customer's site or in the field. This is needed to ensure that this part of the business is transparent to the transfer. When addressing assembly-related issues, quick, precise analysis and resolution are required. In most instances the return will be addressed by the assembler with guidance from the OEM or domestic EMS. If the return is accepted, the assembly site will issue an RMA. The suspect lot will be returned and the site will provide resolution. However, in certain instances the OEM or the domestic EMS may perform the rework if time is of the essence.
Fourth, selecting the transfer team is critical. It's a question of finding a company that is strong in assembly processing, scheduling, communicating and knowledgeable in the way of other product processes. This is important; the company must be able to ensure that schedules and goals are met. This supplier must be able to navigate through process and product issues as well as understand how to resolve issues that could prevent success. Another characteristic that the lead contractor must have is to be a good trainer. There is no substitute for a person who talks and actually knows what he's talking about.
Also helpful is a transfer team where each member can aid in ensuring that there is full documentation, qualification, testing and scheduling. In addition, utilizing local personnel, from that particular country, on the ground, can provide added benefits. The locals can speak the language and will be the conduit between the source and your company. They also know the ways of the country and will fight for your company.
Fifth, establish a transfer plan and schedule. This will allow the company to determine what the delays are and what are their causes. This needs to be a proactive approach, which will avoid issues that can cause a slowdown or interruptions of the schedule. Part of the transfer plan should include a site qualification.
Understanding the costs involved in transferring products and processes is also vital to the success of the transfer. Implementing a transfer will involve travel, manufacturing start-up costs, piece part NREs (Non Recurring Expenses), internal resource expenditures, etc. That is why it is very critical to ensure that this has been reviewed and is approved as part of the company's business plan.
Sixth, establish a site qualification plan and schedule. This should include obtaining quotes, determining if the site meets the company's requirements, ensuring that test functions can be performed at the site, visiting the site and performing a qualification run to prove out the site. operation assemble product and then performing tests against already assembled product. The tests should include visual inspection, taking dimensions if needed, performing quality reliability tests if needed (temp. cycles, high temp storage, bias testing, etc.) and electrical test. In addition, the customer should approve the site based on all of the qualifications outlined here. It may be helpful to obtain customer inputs before the qual build so their test requirements can be added.
Seven, patience is an absolute must. If patience is not one of your virtues, then you will be stressing out on a daily basis. Issues, problems and concerns will come up every day. It is how you, the company, handle these problems that can define success. Overreacting, not reacting and acting too slowly can complicate matters and cause delays. So be patient and take the time to fully understand the situation and communicate.
In summary, following these seven steps should provide a good basis for success. As previously stated, each situation is different because each source and company is different. However, following the seven steps will definitely provide you with a better chance for success.
Understanding the cost involved in transferring products and processes is essential. Cost can be an issue for smaller-sized OEMs. However, this is where a company like ACD can help.
ACD, located in Richardson, Texas, is a domestic EMS that has established a low cost option, which incorporates off-shore manufacturing. ACD will act as the main point of contact and will alleviate issues that were previously discussed in this article. It will handle scheduling, manufacturing issues, the late night communications, assurance of a quality product, RMAs, etc. ACD packages all of this and provides the service to OEMs, regardless of size.
Contact: ACD, 1250 American Pkwy., Richardson, TX 75081 972-664-0900 fax: 972-690-6234 E-mail: Tim.Tsui@acdusa.com Web: http://www.acdusa.com