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Firstronic: Eliminating Hidden Costs
Dual-pot wave system allows changes between leaded and lead-free on the fly.

Original equipment manufacturers (OEMs) outsource to lower manufacturing costs. However, missed deadlines or fuzzy communications can eliminate this savings. The largest cost overruns typically come from unanticipated issues such as excess inventory, missed deliveries, quality issues or product obsolescence. Firstronic addresses these concerns with systems and processes designed to identify issues before they become problems. The company is a Michigan-headquartered EMS provider, serving customers in the automotive, industrial and medical industries.

In 2006, Firstronic's team of seasoned electronics manufacturing services (EMS) executives decided to automate the program management function using an internal management information system called ProManage. The in-house development of ProManage was the first phase of a complete systems upgrade designed to work in tandem with the company's ERP system. The goal was to efficiently manage processes in complex projects from new product launch through end-of-life and facilitate a high throughput velocity culture within a lean environment.

Supporting Complex Projects
The company's customer base includes many complex projects. Some are high volume and some have a configure-to-order (CTO) requirement and/or highly variable demand. In these situations there are several areas of key focus:

  • Ensuring designs are manufacturable and optimized for CTO, where applicable.
  • Developing a forecast sufficient to plan for material requirements.
  • Setting up a supply chain willing to support minimized inventory along with fast response to changes in demand.
  • Developing a manufacturing process which handles variations in demand effectively.
  • Establishing an efficiently-sized finished goods kanban to support unanticipated demand.

Adequately addressing these challenges requires both management judgment and a strong systems approach.

For example, when one of Firstronic's customers was launching a new product, its forecasts were highly variable. The customer's marketing department quadrupled the demand from 50K EAU to 200K and then pulled 90K in the first quarter of volume production. Initially, they wanted all the material to be purchased immediately due to materials allocation concerns. The customer had a historical pattern of large ramps, followed by decreases in orders once demand was clearly established. Firstronic's materials department also saw that the material availability situation was improving, which would likely drive lead-times and pricing down over time. Program management recommended placing orders to cover 35K with adjustments as demand and material allocation trends were better understood.

8K Per Month Demand
Over the first few months, it became obvious that typical demand was in the range of 8K per month. Had the company's team gone with the customer's original request, there would have been significant excess inventory and non-value added costs. This would have included broker premiums to secure the initial volume requirement, as well as significant obsolescence since the product design underwent several changes during the first few months of production volume ramp-up. In this case, there was excellent information sharing on both sides. The contractor provided open-book pricing so the customer was fully aware of the costs of various options. The ProManage system tracked all activities in the project including production validation lessons learned, engineering change notice (ECN) status, projected sales and inventory, shortages/allocated items, quality, on-time delivery performance and open issues. The ProManage system e-mails status reports and assigns tasks to relevant team members. The new product launch (NPI module) tracked not only Firstronic's standard checklist of project requirement milestones, but also the customer's specific requirements. The result was a shortened launch cycle, real-time visibility into project issues and detailed recordkeeping of all activities performed during new product introduction and the ramp to volume production.

Leveraging Information
In Firstronic's business model, the program manager serves as the central point of contact in terms of information flow with the customer. However, the ProManage system automates many of the day-to-day tasks and monitoring activities that otherwise consume a large share of program management time.

Any member of the team can log onto the system and find out exactly what open action items they have on any project 24/7. Team members are e-mailed as new tasks are assigned and the system is preprogrammed in each of the processes it manages to assign standard tasks as the project progresses. One powerful aspect of this system is the fact that the project can be defined and standardized almost immediately, but the team then quickly adjusts the "standardized requirements" to match the individual nuances of each launch thus creating a tailored launch plan for each new assembly. The program manager has the time to better evaluate project trends and look at longer term project issues, instead of getting bogged down in day-to-day tactical tasks.

Engineering and Purchasing
Information loaded in the engineering database aligns with purchasing and demand planning to ensure materials are purchased and product is built to current revisions. The program manager is able to easily discuss critical issues with customers including:

  • Demand vs. forecast trends.
  • Minimum buy liability and excess inventory generated by engineering changes or end of project.
  • Part change notices (PCNs) indicating potential obsolescence issues.
  • Market-driven cost variation trends.

The earlier an issue can be identified, the more options are available for dealing with it and the faster it can be resolved. Fast resolution usually translates to lower cost.

However, information systems technology is continuing to evolve and as it does, Firstronic's team is applying its expertise to leverage these changes. The second phase of Firstronic's systems upgrade involves upgrading to enhance its enterprise resource planning (ERP) capabilities with the addition of Plex Online, a software as a service (SAAS), cloud-based ERP system. The new system is scheduled to go live in June 2012.

The Plex implementation will include the ERP system, manufacturing execution system (MES) module, EDI customer and supplier interfaces, and online quality data collection/reporting tools. Since Plex is cloud-based, Firstronic and customer personnel will be able to access Plex information remotely.

ProManage Integrates with Plex
The Plex/ProManage IT synergy provides a significant advantage — the ability to provide exceptional levels of responsiveness and project visibility with minimal overhead resources. Once a project is loaded into the system, the project team gains a 24/7 virtual assistant. The ProManage system acts as a "force multiplier" by tracking critical tasks and notifying members of the project team as soon as a timeline begins to slip, and escalates if the slippage isn't immediately addressed. It also serves as a centralized database for all project activities, supporting both traceability and product history recordkeeping.

The Supply Chain
Companies do not compete against other companies. In reality, supply chains compete against other supply chains. Efficient supply chain management minimizes liability and reduces overall cost. Firstronic leverages its supply base expertise as part of design for manufacturability/testability (DFM/DFT) recommendation development.
Production equipment, floor layout and personnel cross-training contribute to maximized flexibility at minimal cost.

PCB fabricators may provide input on optimum layouts for boards, and test fixture suppliers may recommend the best layout for test coverage. Suppliers also proactively provide updates on component lifecycle trends. This information is added to the overall recommendations that Firstronic's team makes in its new product introduction (NPI) process and during the ECN process if applicable. To minimize liability yet support variable demand, both raw materials and finished goods inventory kanbans are established. Suppliers agree to a bonded inventory based on each customer's forecast and likely variations in demand. A finished goods kanban is also in place and is normally sized to cover two weeks of demand. Firstronic builds to forecast and pulls on demand. In the event demand changes radically, forecasts and bonds are revised. The Plex implementation will further reduce transaction costs within the supply chain by supporting a two-bin kanban system with suppliers.

Flexibility on the Floor
Firstronic rounds out its holistic Lean manufacturing approach with special focus on production resources. Production equipment, floor layout and personnel cross-training contribute to maximized flexibility at minimal cost. Key principles include:

  • Select equipment that facilitates minimized setup and changeover time.
  • Produce entire product families with a single setup.
  • Schedule smaller batches and work toward minimal work-in-process (WIP).
  • Focus on high yield via assembly design input and process optimization to drive high throughput.
  • Fixturing which enables a variety of panels to be processed and scanned through the wave solder.

As an example, Firstronic utilizes a dual-pot wave solder machine. Through-hole assembly and leaded technology are often overlooked in assembly optimization efforts, because both represent technologies in decline. Firstronic has chosen to invest in wave technology that allows changes between leaded and lead-free on the fly, because leaded assemblies with mixed technology are still a significant portion of production in many complex projects. Assemblies carry an RFID tag which determines its profile in the wave. Leaded and unleaded assemblies can be processed simultaneously because the system matches the pot used to the RFID tag information. This eliminates the need for multiple changeovers or multiple machines, while enabling the company to support customers that have products with both requirements without the concerns of mixing product and/or process.

The Cost Equation
As these examples indicate, eliminating hidden costs is a combination of good processes, robust communication, trust and teamwork. A key difference in the Firstronic equation is the blending of team expertise with sound Lean principles and evolving technology. Solutions aren't simply bought off-the-shelf, they are enhanced to support the unique challenges found in the EMS environment through the development of robust in-house tools such as the ProManage system.

Firstronic provides advanced electronics manufacturing services and optimized supply chain solutions for the electronics industry. The company has a 35,000 square foot facility, state-of-the-art equipment and a seasoned management team with an average tenure of 20 years.

Contact: Firstronic LLC, 1655 Michigan Street NE, Grand Rapids, MI 49503 616-456-9220 fax: 616-456-9230 E-mail: info@firstronicllc.com Web:

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