The Complete Guide to Outsourcing your Electronics Manufacturing

Outsourcing allows you to reduce your time to market, which keeps you ahead of your competition and ensures that your customers get to enjoy products when they want them. The speed in which you can satisfy consumer demand makes the difference between a successful/growing company and one that gets left behind the competition.

So what are the strategic factors behind an OEM’s decision to outsource?

1. Defining core activities

All companies want to optimise the return on the resources that they have, which can lead to the  decision to outsource processes that they may define as non-core.

In the early days, companies outsourced what they considered to be peripheral activities such as cleaning, transport logistics and maintenance.

The question OEMs are now asking themselves is ‘what really is core to our business?’

So how do we define a core task?  

Let’s look at an example of a large German OEM. In addition to manufacturing all the specialised components, cable looms and electronics for their products, this OEM has an onsite machine shop producing their own fasteners. Vertically integrated it may be, but unsurprisingly the lathes and milling machines that make these rather standard parts are idle much of the time. So is the model really that efficient?

Conceptually at least, this example isn’t so different from placing surface mount technology (SMT) components on a printed circuit board (PCB.)

The growth of outsourcing in electronics manufacturing and the arrival of the term ‘contract electronics manufacturer’ (CEM) dates back to the first realisation that the PCBA was a very identifiable, specific, sub-assembly that OEMs could outsource.

This outsourcing process has then been further accelerated with the subsequent introduction of SMT and the resulting increased sophistication and cost of the equipment required to produce such an assembly.

2. OVERCOMING CAPACITY CONSTRAINTS

Capacity constraints can arise when an OEM outgrows its premises, has difficulty in recruiting enough people with the correct skills, or needs to invest in additional or upgraded equipment.

If your marketing campaigns have gained real momentum and have led to an increase in orders for your sales team, then you’ll need the resources and skills to manage these new customers and satisfy the demand.

Perhaps you crave additional revenue but have taken the strategic decision to limit your sales and marketing activity in fear that any new business would deplete the resources you have? This can be a particular challenge for organisations with long sales cycles, where new activity takes months, if not years, to come to fruition.

Carrying additional layers of overheads in order to react to unpredictable demand can be a challenging dilemma for many Financial Directors.

But what’s the alternative?

Run your organisation in a leaner way and then hope to recruit additional staff when the sales come flooding in? What if you struggle to find the right people, with the right skills, when you need them the most?

Sometimes the comfort blanket these additional overheads provide is too hard to completely relinquish. An OEM whose general level of demand is increasing but that can’t, or doesn’t want to, increase its capacity may need to question its entire strategy and give serious consideration to outsourcing.

When a company decides to outsource its manufacturing it can send shock waves through the organisation. If you are not prepared for the initial disruption, you could soon run into difficulties.

Before talking to a subcontractor, you should consider the implications outsourcing will have on your people, plant, equipment, suppliers, customers, and internal resources.

1. Staff Implications

It is advisable to get Human Resources (HR) involved in the process early. Unless you have plans to re-deploy your workforce you will be making a number of people redundant. Furthermore, depending upon the proportion of work carried out by some staff, it is probably the case that you cannot simply let those people go.

All businesses in the United Kingdom are required to comply with the Transfer of Undertakings (protection of employment) regulations (TUPE) which were updated on 31 January 2014. TUPE applies to organisations of all sizes and protect employees' rights when the business they work for transfers to a new employer, or when businesses are merged, sold or bought. The regulations also apply in outsourcing situations such as when a contract is put out to tender or when work is brought back in house.

Failure to take these kind of regulations into account can mean running into difficulties further down the line. Some EMS companies may have direct experience in this area however it is vital that you seek professional advice yourself from the beginning. Even if no personnel are likely to be transferred under TUPE or made redundant, your HR department may still need to be involved in staff retraining, etc.

2. Plant and Equipment Implications

When it comes to plant and equipment, you have three options – you can dispose of it, sell it or transfer it to your subcontractor. As already mentioned above, there may be certain pieces of equipment that you want to retain such as bespoke or niche pieces of equipment – like a test fixture. For other equipment, it may make sense to transfer or sell it to your new outsource partner.

3. SUPPLIER IMPLICATIONS

If you have existing contractual arrangements with your suppliers that need to be addressed, can they be cancelled or restructured?

At the very least, you will probably have long-standing relationships with some of your suppliers, so if it makes sense those relationships could be transferred to the subcontractor.

Don’t be surprised if you encounter some resistance internally at this point. There may be people in your organisation who want to retain some of these relationships. But, as we mentioned above, the greatest benefit will be gleaned by handing as much as possible over to your new outsource partner.

A good subcontractor would be able to take over the supply chain requirements seamlessly. And this might include working with your key suppliers.

Generally speaking you will see more benefits by moving all procurement responsibility to your subcontractor.

However, there may be critical bespoke items that a supplier has designed specifically for your product. In this instance, it may make sense for you to continue to purchase these directly and retain the relationships. Most contract manufacturers will respect your decisions and raise no objections.

While it can be tempting to start selecting potential EMS candidates straightaway, at this point, a little bit of restraint is highly recommended.

It is critically important that your team first determines its objectives. Naturally, this will vary from one company to another, whether you are looking to outsource a single product, shift growing production volumes to a higher capacity partner, or closing down your entire manufacturing operation.

You also need to make sure that everyone involved in the plan, including the steering committee, agrees up-front on what ‘success’ will look like at the end.

Due to the extended timescales that can be involved, the original objectives may sometimes be forgotten or even replaced with new ones. It’s important then to make sure these are communicated throughout to ensure expectations are managed.

It’s recommended that you make sure any project plan you create, and the milestones within, remain specific, measurable, attainable, realistic and timely (SMART).

1. SEARCHING FOR AN EMS COMPANY

With your objectives established, the supplier selection process can begin in earnest.

Unlike some markets, it is relatively difficult to research the EMS sector, which is fragmented to say the least. While online research can be undertaken, this can be time consuming because there are many suppliers across multiple layers within the market.

One of the most common ways OEMs find potential partners is through recommendation or word of mouth.

OEMs will typically start with a shortlist of about ten potential suppliers, which will then reduce down to three or four strong candidates. Keeping your original objectives at the forefront of your mind will help immeasurably in narrowing down your options to a preferred shortlist.

For example, you may want to work with an EMS partner that is within reasonable travel distance of your head office.

Perhaps having a partner with both UK and European manufacturing facilities is important to your business?

Or you may have a product with a lot of electro-mechanical moving parts. Whilst there are many EMS partners that can deal with static products i.e. printed circuit board assemblies (PCBAs), fewer are able to supply, fit and manage the complexities associated with electro-mechanical builds.

Keeping your objectives in mind will help you sift through the potential pool of suppliers available to you, and define further the criteria that are important to your business.

Throughout your research, you should also give consideration to your Terms and Conditions (T&Cs.) Later on in the process, you will need to send out T&Cs to your final shortlist, and if you are thinking of running a Service Level Agreement (SLA) with your new supplier, it is best to start working on this now in background whilst the criteria for potential suppliers is fresh in your mind.

2. QUESTIONING CANDIDATES

Once you have shortlisted your suppliers to three or four potential candidates, it is good practice to send them a pre-qualifying questionnaire.

The questionnaire should be short and to the point – probably no more than two pages long - and should include an overview of your company and information on the type of product you are seeking to outsource.

The purpose of sending out the questionnaire is to determine quickly whether there is a potential fit between your company and the EMS provider. Through your initial research you’ve already determined that there might be a match; now you’re looking for further evidence.

Pay close attention to the answers that you get from your candidates and how they respond to your request.

Do they seem to be genuinely interested in your business?

Do you get the impression that they have the right skills and experience to work with your company?

When you’re going through the questionnaire, trust in your intuition. It will become apparent as you read through the answers whether the EMS provider is being upfront about its skills and experience or putting the best gloss on its capabilities.

Some OEMs like to get references from the EMS providers existing clients. Whilst these can be of use, remember the potential supplier will always select its most loyal customers for the exercise.

It’s important to carry out your own research as well. Based on the answers you get back from your questionnaire, you should be able to further reduce your shortlist to two or three potential partners.

The design decisions you make can have a huge impact on your product’s viability through its life-cycle. For OEMs who may be already outsourcing their procurement, build, test and distribution processes, weighing up whether to outsource product design could well be the next logical step.

Maintaining an internal design team can offer many advantages in terms of retaining knowledge, managing cost and protecting Intellectual Property. However the involvement of an external design house, independent contractor or EMS provider may bring with it a more specialist set of skills, an enhanced understanding of the design process, and a greater familiarity in handling the unique challenges of each new project.

So why might you choose to outsource your design? To whom could you potentially outsource? And what qualities should you look for if you do decide to seek out external design solutions?

It may be helpful to bear in mind the following four key questions as you consider your options:

1. How important or relevant is it to your customers that your products are designed in-house?
2. How risk averse are you as a business?
3. Are you willing to carry the cost of maintaining a permanent design team?
4. Are you looking for new ideas or are you planning to maintain or evolve an existing range?

KEEPING DESIGN IN-HOUSE

Managing your own team of designers enables you to build, fine-tune and retain specialist knowledge and ensures you have consistent and dedicated attention to your design projects. There may however be cost implications, the potential to overload your existing design team or the challenge of ensuring they’re productively occupied in the downtime between projects.

Choosing to design your own products in-house equips you with unique, complex and specialist knowledge. No one knows your products better than you and, over time, your design department can build up an invaluable bank of expertise that is specifically applicable to your projects. It can also give you greater transparency as to how your money is allocated for each project.

Keeping everything under one roof can also give you the reassurance that thorough, dedicated and consistent attention is being given to the design process.

And if you’re maintaining an ongoing schedule of design activities, and you’re able to keep your design team busy and motivated, then there’s the potential to significantly save on wages and other staff costs.

Manufacturers are particularly prone to damage as a result of theft of Intellectual Property (IP) through counterfeiting, copying or stolen designs so by keeping close control on your design process you can also maintain better control of your IP assets.

An in-house knowledge of the design process could also be invaluable in providing your field service engineers with the knowledge to handle the maintenance, upgrading or repair of products.

Conversely though, maintaining a permanent, in-house, design team means a continual overhead so you’ll need to ensure you can keep your designers productively occupied so you’ll want to consider the investment required in resources, equipment and infrastructure.

Technology is constantly on the move too, so it’s wise to budget for retraining and investing in your designers to ensure they’re keeping pace with new developments.

Relying solely on an in-house design team may also limit your opportunities for a new perspective. How innovative are your existing designers? Are they better suited to evolving existing products or do you want them to come up with new ideas?

If you are considering outsourcing your manufacturing to an EMS provider, you need to be confident that your supply chain will be managed effectively.

With greater global competition, rising consumer expectations and increasingly complex patterns of customer demand, companies today are facing many business challenges. On top of this, they have to operate in a world marked by chronic instability.

Businesses continue to be challenged by a range of both man-made and natural events - whether it be the implications of Brexit, the recent US presidential election, the devastation of the latest Hurricane or the on-going threat from North Korea - all have the potential to create volatility and put huge pressure on supply chain operations.

In recent years, supply chain efficiency, excellence and transparency have become more pressing issues. Governments, consumers and companies now take a keen interest in the provenance of their goods.

Increasingly, these parties are demanding assurances from suppliers that the products they produce are manufactured safely, ethically and in an environmentally sustainable manner.

Fortunately, the principles behind good supply chain management apply across industries, and if properly followed, can address these challenges.

Supplier Selection

When an OEM decides to outsource manufacturing to a contract manufacturer it has two basic choices. It can either transfer management of its existing supply base to the assembly partner or allow them to choose suppliers of their own choice.

Most EMS providers are happy to work both ways. After testing the first option, OEMs often end up allowing the contract manufacturer to choose its own suppliers. After all, from a cost perspective it doesn’t make sense for the OEM to maintain its own procurement team alongside its assembly partner’s operation.

And if an EMS has proven its reliability, the OEM is much more likely to entrust it with greater responsibility. In any case, it is relatively easy for an OEM to determine whether an EMS has a reliable supplier base.

Reputable assembly partners have long standing relationships with their suppliers. They also tend to choose suppliers that have an intimate understanding of the market; are capable of producing a wide range of products; and can cope with peaks and troughs in demand.

Assessing Suppliers

Most contract manufacturers will have processes in place to check the capabilities of prospective suppliers. Methods may vary, but the most common processes will range from potential suppliers completing commercial and quality questionnaires to a detailed validation of quality standards through a formal audit visit.

Of course, best practice should show an understanding of the supplier base. Potential suppliers must illustrate that they understand the right combination of methods appropriate to the end product and the components being bought.

ONGOING PERFORMANCE MEASUREMENT

Confidence in the supplier management capabilities will be helped if there is evidence that the EMS provider measures its suppliers’ performance on a regular basis. Suppliers should be monitored using objective measures related to quality, delivery, cost, and other factors, and action plans should be put in place to improve performance.

ELIMINATING DUPLICATION

Understanding how your EMS might buy your components is a useful exercise in judging their buying efficiency. Some will create new component part identities for each customer or product, which can result in the same physical component being bought under different part numbers. Often it is impossible to tell whether the same part has been bought more than once. This method of segmenting customers’ parts can be very inefficient, as parts may not be bought from the same supplier; there may be different prices; and even varying quality levels.

A more effective method is a commodity type approach that considers, and then groups, all parts of a similar nature, regardless of the customer or the product.

A significant number of EMS providers now employ buyers with commodity specialist skills that focus on particular commodities. So for example, they may have a single person purchasing sheet metal for all of their clients which enables development of deep expertise in the commodity; the ability to apply purchasing economies of scale; and an understanding of the market which means they can anticipate, and deal with, fluctuations in price and availability.

Having an expert buyer on board can also make a difference to purchasing specialist parts. For example, an OEM may request a particular type of fastener. The specialist buyer is likely to quickly identify a number of potential suppliers and draw up a shortlist. The buyer may also be aware of alternatives that offer better cost and improved performance, but this may not always possible if purchasing decisions are made on a project or customer basis with generalist buyers.

Once a product has been outsourced, an OEM will have very little hands on involvement. So it is vitally important that the OEM be assured that their EMS partner has the right supply chain in place for its product.

Whether the EMS provider is supplying the OEM on a ‘just in time’ basis from stock or with a longer lead time will depend upon the supply chain model agreed by both parties. Once a service level to the OEM has been set, the efficiency of the supply chain should be examined.

The effectiveness and efficiency of this arrangement will be influenced by the speed and accuracy of demand and information signals flowing down the supply chain from the OEM to the EMS provider and then onto their suppliers. It will also be impacted by the speed and efficiency with which materials flow up the supply chain back to the end customer.

DEMAND PLANNING AND FORECASTING

Buyers also need accurate forecasting information to do their jobs effectively.

Most EMS providers use some form of Materials Requirement Planning (MRP) system to break down the customers’ orders and forecasts into a requirements schedule.

The accuracy of the forecast can be vital in helping the contract manufacturer to ensure it is able to meet the customer’s demand, and in providing a reliable forecast will ensure they can build flexibility with confidence into the manufacturing build schedule.

Standard assignments involving long term forecasts are much easier to manage. For the process to work effectively the OEM needs to be clear on its timelines. However, this information may not always be forthcoming.

If a client wants a product produced at short notice and components with long lead times are involved, it is good practice for the EMS company to have either finished or component stock that it can pull on.

INVENTORY POLICY

The service level agreement between the OEM and their assembly partner will largely determine the finished goods stocking policy.

To calculate this policy, many contract manufacturers use a supply chain ratio called the P:D ratio (Production Cycle: Demand Requirement) which allows for comparison between the demand or market lead time expectation for a particular product and the production lead time (including component material lead times).

So, if the OEM requires a lead time from its EMS partner that is less than the production lead time, then stock with material underwriting within the supply chain will probably be required.

If the ratio is reversed, where the demand lead time is higher than the production lead time, then it is possible to supply without stocks being held in the supply chain.

Many OEMs will be wary of committing to stock upfront given the capital expenditure involved. But a knowledgeable outsourcing partner will understand the critical parts, in terms of long lead times, and work with the customer to ensure component stock is available at the right time.

By investing in these components, the EMS provider will be able to meet its targets and reduce the OEM’s stock liability at the same time. The best contract manufacturers apply intelligent stock profiling systems or methods to make these calculations.

Customer forecasts, lead times, market intelligence data are typical of the data that is considered in the stock holding calculation. The figure will then be used by them to determine inventory and ordering policies.

The inventory policy covers the amount of stock that the EMS provider is prepared to hold on site on behalf of all of its clients. This feeds directly into the ordering policy. If the EMS provider is smart, it will order high value parts frequently, scheduled to arrive just in time to fulfil firm orders, so that it can avoid holding too much inventory. Conversely, it will order low value parts – like fasteners – on a much less frequent basis.

It is good practice to continuously monitor inventory and ordering policies. Sometimes assembly providers will adopt sophisticated statistical approaches to improve their policies. For example, where requirements are not consistent, standard deviation of demand might help to spot trends. This can help customers improve data knowledge and supply chain operations and reduce their liability. To help ensure that schedules and performance from suppliers are met, most EMS providers will have some form of contract in place.

A simple but effective supply contract would include, at a minimum, agreement on pricing, lead times, batch quantities and any stock commitments.

Turning a new product design into reality is an exciting prospect. It’s also an incredibly complex process that requires care, attention, and control at every stage. Get it right and you stand to gain valuable market share. But fail to launch your product in time, or on budget, and it could be game over.

As an OEM, it’s crucial to verify your EMS provider’s New Product Introduction (NPI) process during the supplier selection stage.

Each assembly partner will have a different approach to how they manage new products in their manufacturing environment so it’s crucial you understand exactly how your EMS partner manages theirs.

But just what exactly is a ‘new’ product? In simple terms, a ‘new’ product is anything that the EMS partner hasn’t built before. It might be a brand new product which is in the prototype stages. It could also be an up-issue to an existing design that they’ve been building for months. Or it could relate to a product that has been previously outsourced and has recently been transferred to a new assembly partner.

Any product or variant of product that is being built for the very first time should be put through an NPI process to ensure that future production volumes can be built efficiently. Your EMS partner’s assembly equipment, staff, build documents and internal procedures will be unique to them, so the NPI process ensures that your product design and their internal assembly processes are suited before there is any thought of producing in higher volumes.

A huge amount of preparation work should also take place behind the scenes before the very first electronic component is soldered to a board.

For example, your EMS partner will have already quoted the product, loaded the Bill of Materials (BoM) onto their system and acknowledged the order. They will also have procured all of the materials, taken delivery, inspected them and assigned them to a unique works order.

Their engineering team will have checked the PCB panelisation, they will have created the necessary programmes for the pick and place and Automated Optical Inspection (AOI) machines and they will have put together bespoke build packs for the production teams to work against.

Solder stencils will have been ordered and all of the materials required for the job will have been prepped for assembly (including baking the bare boards to draw out moisture, cropping component legs for through-hole placement or loading the pick and place feeders with surface mount reeled devices.)

Let’s now explore the four key elements of the NPI process. Depending on the complexity of the design, or your unique outsourcing strategy, a product could pass through each of these sections in turn, or it could skip a step or two.

1. Surface Mount Technology (SMT)

• Solder paste printing  - This is the most common method of applying solder paste to a PCB, often using a stencil which has been laser cut in stainless steel or nickel. The volume of solder applied is controlled by the stencil thickness and aperture (hole cut in the stencil) size which corresponds to a pad on the PCB. A key factor the EMS partner will need to consider is paste release to ensure the solder paste adheres to the PCB and not the stencil. The type of solder paste used, the solder sphere size and the solder alloy used also have a crucial impact on print quality. Once your assembly partner has designed the stencil, they should then consider the machine settings. It is important to fully support the PCB during printing either through automated tooling pins or a dedicated support plate. The flatter the PCB during the printing process the better the results will be. Other contributing factors can include speed and pressure of the squeegees.
• Component placement - The process of placing components onto a bare PCB can be broken down into three elements:
  • Material - each component is allocated a feeder which acts like a dispenser, with the aim of minimising assembly time
  • Program  - typically an XY placement program that instructs the machine which component goes where on the board and enabling the setting of definitions such as  shape, size, value, number of leads etc.
  • Placement - the process of populating the PCB which involves the machine picking a component from a feeder via a vacuum nozzle.
• Solder reflow  - Once the PCB has been populated the next step is to reflow the solder. The program for the reflow oven is referred to as a profile which commonly takes the form of a list of temperature settings. When an assembly partner receives a PCB to profile for the first time they may start with a base profile that has been developed over time to cover most PCB assemblies. They may then attach thermocouples to certain components on the PCB which travels through the reflow oven whilst the temperatures are recorded via a data logger. Using the data displayed they can adjust the oven parameters (temperature and belt speed for example) to achieve the desired profile. The profile should be determined from the solder paste data sheet but also needs to take into consideration any special component requirements.
• Automated Optical Inspection (AOI) - This is the stage where your EMS partner will check for any assembly errors such as component absence, polarity, misalignment, insufficient solder, solder bridging, etc. Any non-complying defects identified are then presented to an AOI Inspector who will determine if a true defect has occurred. All fault data should be constantly reviewed and analysed to help identify trends and allow process improvements to be made, reducing future rework and increasing production efficiency.

2. Plated Through-Hole Assembly (PTH) 

The PTH element of the NPI process can be broken down into three parts:  Hand Solder, Wave Solder and Inspection, as described below:

• Hand Solder - using an iron, solder, soldering wick, and sometimes flux to attach surface mount components to a circuit board. Hand solder operators need excellent component knowledge, hand soldering skills and an in-depth understanding of the buildpacks they use.
• Wave Solder - a large-scale soldering process where the circuit board is passed over a bath of molten solder and in which a pump produces an upwelling of solder that looks like a standing wave.
• Inspection - the process of inspecting a PCBA after a build, through a visual check and/or magnification to verify that the board has been assembled correctly, that components have been correctly mounted and oriented, good solder fillets and joints are evident and that any special instructions have been completed.

Deciding to outsource responsibility for your entire assembly operation to an EMS partner relies on having a comprehensive plan in place.

And much will depend on how much of your shop floor you intend to transfer. Outsourcing PCBA assembly, for example, is a well proven approach and may seem like a low risk strategy. However, even this can introduce complexities, which, if not planned for, can catch you out.

In some respects, the transfer of physical resources can be simplified by choosing to outsource your entire manufacturing operation as you draw a clear divide between the OEM and the EMS, with your assembly partner taking full responsibility for all elements.

However, while clarity and ownership are achieved, complete outsourcing strategies require greater planning and execution.

So here are some points to consider:

Skills and expertise

Key elements of the knowledge and expertise required to build and test each of your products often resides in the heads of your people. Knowledge is one of the most important resources you have and, while arguably one of the most difficult to transfer, it’s vital that this be implanted into the new supplier.

Often too, while your assembly documentation may contain build instructions and assembly diagrams etc, the shop floor staff building the products will have evolved processes which may not necessarily have been reflected on paper. This local knowledge can be vital to achieving the required build times and product quality so it needs to be captured and incorporated into your EMS company’s manufacturing documentation.

It’s possible too that your existing staff may need to be re-trained in other areas of your business. Learning new skills may feel daunting, and particularly if they have worked on a particular process or product for many years. On the other hand, some staff may welcome the change and see it as a great opportunity to develop themselves further.

If existing staff cannot be re-deployed within the business then unfortunately you may be faced with a redundancy or, in some instances, a TUPE situation as discussed in Chapter 3. It’s therefore important that your HR team are involved from the outset. The business case for the decision should be made clear to all employees - and compassion provided to those involved in the process at every stage.

Plant and Equipment

When it comes to your existing plant and equipment, you’ll need to decide piece-by-piece if it makes sense to dispose of it all together, to sell it on or look to transfer it across to your EMS.

If you are looking to subcontract your complete PCBA processes and your EMS already has the assembly equipment they need, then it probably makes sense for you to look to sell yours.

However before you start looking to third party suppliers that trade in second hand equipment, it’s worth going back to the original manufacturer of the equipment. Quite often they are interested in taking back their own branded machinery, as it gives them the opportunity to refurbish it and then sell it back into the marketplace with associated maintenance contracts and warranty agreements.  

If you plan on retaining some parts of the build in-house - for example, final assembly - or are looking to phase in the supply of additional products within your range over time, then you may need to keep hold of some equipment, until the transfer is complete.

One area that often catches OEMs out is bespoke test equipment, which has been calibrated and runs a specific software variant. If you are looking for the EMS company to test your product but plan to retain other products that share the same test in-house, if you only have one set of equipment, a second set will need commissioning.

Stock

One of the benefits of outsourcing is the reduction in raw material stock holding. However, if not planned correctly, it can leave OEMs with a warehouse full of redundant stock.

Talk through the options available to you with your EMS. Most will be happy to transfer key items, providing they have been stored in accordance with manufacturer’s guidelines, are the correct revision (including bare PCBs, programmable items) and remain cost neutral - i.e. the unit cost they pay from you is the same as the price they would pay new through the supply chain.

There may be some items though (such as fasteners or generic resistors/capacitors) - that are simply not worth transferring over and are better off being disposed of early on.

Some OEMs get caught out by their existing supply chain tail. Long-term forecasts and scheduled orders, along with buffer stock agreements, all need managing, to avoid future deliveries turning up long after production has been transferred across.

While your EMS will be happy to review your supply agreements at the start of the project, they may not be as keen to do so once their own supply chain has been established.

If your expectations are that your EMS will take over your supply chain completely, we recommend drawing up a deed of novation. This will document the terms of transferring your contractual obligations so that all three parties - you, your outsourcing partner and the material supplier - are aligned when it comes to new commitments and responsibilities.

To help ensure the physical elements of your assembly line are transferred appropriately it is suggested they are built into your project plan; with clear owners and timescales assigned. Once all areas are included you will find that some can happen straight away while others will be dependent on a number of previous actions taking place.

Be prepared for your project plan to evolve – it’s only natural that it will. However, the most important thing is you have one. Those responsible for completing specific actions also need to make sure they have the resources they need in place, with any potential gaps discussed and resolved. This should be done well in advance of any manufacturing moving over to the new EMS partner.

BOX BUILD

Box build is probably the most misunderstood term in electronics manufacturing, covering everything from putting a PCBA in a simple enclosure and connecting it to a user interface and display, to producing a complete machine with tens of thousands of parts and hundreds of sub assemblies.

The potential issues your EMS partner may come up against will vary, depending on the complexity of your product.

When it comes to sourcing an enclosure for example, there are essentially two options - an off-the-shelf version or something more bespoke.

If your assembly partner goes down the first route, there are plenty of vendors to choose from, with generic enclosures available in a wide variety of materials and finishes. Off-the-shelf enclosures can also offer the advantage of lower unit price, reduced minimum order quantities and increased availability.

A ready-made enclosure however won’t have been designed for your specific purposes. So it’s crucial to choose a model into which your PCB or PCBs can fit securely and to ensure that any additional electronics (displays, connecting cables, fans, LEDs, etc.) won’t become trapped when the front and back halves are joined.

Another factor to consider is whether the design will allow you to carry out routine maintenance. The last thing you want is for a product to be rendered obsolete because it’s too difficult to carry out service repairs, for example.

As a result, the assembled box build should be tested out in the field to ensure it can withstand ‘real world’ conditions that it will be placed under during its lifetime.

Choosing to use a bespoke enclosure means many of the issues outlined above will not be relevant, as it will have been designed to meet your specific needs. Your PCB or PCBs will slot easily into place, and there will be sufficient space for other internals, to avoid items becoming crushed or putting pressure on one another.

Similarly, the enclosure will have been created with the right attributes for the environment into which it will be placed.

However, there are still a number of potential problems. For one, a bespoke enclosure is likely to be expensive, often requiring several thousands of pounds in upfront tooling. And, once you have ordered one from a supplier, you need to be able to ensure that it will continue to be available so that you can ensure your customers get high-quality products within their specified timeframes.

Designing a box build with procurement in mind will help ensure that the components you require remain available throughout the lifetime of your product.

It’s also vital to create a complete set of drawings for the enclosure, with acceptable tolerance levels and clear guidelines when it comes to quality standards, to avoid ambiguity at the goods receipt and build stage.

Poor documentation and lack of data control could cause delays in manufacturing your box build and result in an incorrect or inferior product. So while it’s easy to let paperwork fall to the wayside, it should remain a priority.  

BoMs, CAD drawings, Gerber files, software and any other key pieces of data need to be revision controlled and managed correctly. Any amendments that do take place during the build should be controlled through a stringent engineering change note (ECN) process.

Any drawn items, such as bespoke labels, enclosures or metalwork, should have tolerances and finishes clearly specified. Leaving these things open to interpretation can cause problems with assembly or quality control later.

It’s far easier to identify problems with a clear trail to look back on – and it will save valuable time and money in the process.

Testing is part of life. At the end of our school years, we sit exams to prove the knowledge and skills we have accumulated. Our cars undergo an MOT test each year. Businesses are assessed to see whether they meet industry safety and quality standards. And, when it comes to manufacturing, testing is just as crucial.

Testing is an integral part of the manufacturing process to ensure defects are identified and resolved before a product reaches its intended customer. It’s also the only way to achieve optimal processes that result in products that have as close to a 0% failure rate as possible.

And despite common misconception, test is not postscript to the manufacturing process but something that should be carried out at various stages throughout the process flow.

Finding a fault in a product before it has been manufactured to its full value, and either rectifying or scrapping it, is a lot more effective than testing the finished goods, only to discover a problem and then rejecting them. So for your EMS provider, testing should be at the heart of everything they do.

In this section we explore seven different types of test.

1. IN-CIRCUIT TEST (ICT)

ICT is a highly accurate form of automated test equipment (ATE.) It is used to test PCBAs by carrying out a “manufacturing defects analysis” (MDA) which looks for common process faults such as open circuits (e.g. something not soldered), short circuits, passive component measurements (resistors and capacitors), diode and transistor orientation, and basic supply voltage measurements. Integrated circuits (ICs) can have some powered, even basic functional testing, as well as “vectorless” test to check the soldering of pins to the PCB through a non-contact, usually capacitive, probe or plate. ICT can also provide limited analogue and digital measurements.

2. FLYING PROBE

Flying probe is another type of ATE used in electronic PCB assembly to carry out MDA. Most flying probe systems also offer limited optical inspection, which can add coverage for those components that can’t be accessed electrically. The test method typically uses four probes, which can be programmed and reprogrammed for each board design. Flying probe is best suited to lower volumes where the design may change a number of times throughout the lifetime of the product, or for boards where test pads have not been designed in. As with ICT, a BoM, CAD data and schematics are required, as well as populated and unpopulated sample PCBs. Flying probe machines can also probe the ends of component pads and uncovered vias (as long as they are not “tented”) to get access to the electrical networks.

Shipping your products to their end destination is the final stage in your manufacturing process  - and one which is essential to the ongoing success of your entire manufacturing operation.

First impressions count. If products arrive late, in the wrong quantities or configuration, to the wrong people, or if they are damaged, then this stands to undermine the overall success of your manufacturing process.

Your end users won’t appreciate the time, complexity and costs involved; they only care about getting their products on time and to the specification they ordered. What’s more, implementing good shipping practices could help you to tap into new markets, increase your company’s scalability and efficiency, and open up new doors. So you want to get your shipping right – every time.

Why outsource your outbound logistics?

In its simplest form, outbound logistics relates to the storage, transportation and distribution of your products. However it can encompass a broad range of processes - from order processing, picking, configuring to order, packing, marshalling and transportation, through to the shipping of spare parts.

Typically, your EMS provider will supply product to you on a call-off basis, as and when you need it, or against a firm delivery schedule. And, unless you have specified something different, your EMS supplier will arrange the transportation using their own branded packaging.

Of course one of the advantages of having your EMS provider deliver product to you is you get to see what you have ordered. You can inspect it, configure it and then send it out, safe in the knowledge that it left you in perfect working order.

For some OEMs, this level of control and reassurance is very important - particularly if there have been issues with product quality or late deliveries in the past. But this approach can be more expensive in the long run, as you will need to retain the layer of overheads associated with receiving, storing, picking, packing and then dispatching the goods to the end customer.

It’s also likely that the product could be handled multiple times, increasing the risk of damage. And, unless it has been shipped from the EMS provider in your own branded packaging, you’re going to need to repackage it again yourself.

If you are carrying out other processes – such as configuration and testing – after your product has been shipped to you, then you are potentially increasing the time for it to reach your customer. Most low volume, high complexity (LVHC) products will require some degree of configuration, and this can be achieved more quickly when carried out during the manufacturing process, by your EMS provider.

In the current market, the speed of order to fulfilment is a competitive advantage. B2C companies, such as Amazon and Argos, have created a culture of very fast delivery times, and these expectations have filtered into the B2B market as well.

Flexibility

When considering outsourcing, there are some important questions that you should ask yourself about the future direction of your company.

In thinking ahead, you can begin to work out what logistics arrangements you will require to meet changing customer demands.

If you are growing, and targeting new opportunities, then you will likely be coming up against specific challenges. Perhaps you don’t have the space into which to expand? Or maybe you need to ship products from different divisions of your organisation at disparate times?

Your EMS partner can help by implementing sophisticated systems and processes such as configure-to-order, late-stage configuration, postponement manufacturing, mass customisation, supply chain pipelining and agile manufacturing.

Mass customisation, late-stage configuration and postponement manufacturing effectively refer to the same approach. The use of flexible manufacturing systems enables the unit cost savings of producing in volume to be combined with the flexibility of individual product customisation.

In practice, mass customisation is where configuration is not carried out until the latest possible stage. Typically, an OEM will have already received orders for their products and, therefore, they will know the relevant customer details, product requirements, the exact configurations, the options to be fitted, etc. and the delivery destinations.  

To achieve all of this consistently and on budget, your EMS provider will need to have created an agile manufacturing environment, with robust systems and procedures to support their highly trained people.

These could include:

• Automated material requirements planning (MRP) systems linked directly to customer forecasts.
• Material purchase orders sent and acknowledged in “real time” via electronic data interchange (EDI).
• NPI procedures with feedback reports that document every stage of that product’s journey.
• Sophisticated document control systems capable of managing multiple revisions of build data and engineering change notes (ECNs).

These procedures, plus others, enable the best EMS providers to respond quickly to changes in customer needs while still controlling their costs and quality.

It is important to have an understanding of the customer order cycle, which is how long customers are willing to wait for the products they order, as well as considering material lead-times and manufacturing hours, to decide how agile systems need to be.

With a short customer order cycle, long material lead-times and a complex product with lengthy manufacturing times, agile production is clearly required. However, without all of the material and components required to complete an assembly operation, no manufacturing facility - regardless of how slick its processes, systems and staff are - will be able to implement such an environment.

So supply chain pipelining (or planning where inventory needs to be along the supply chain) is also going to be crucial in order to support a specific product. There are multiple options and selecting the right combination for each product will be critical in ensuring a flexible, agile solution.

The start of an outsourcing partnership is an exciting time for an original equipment manufacturer (OEM) - but it’s also one filled with unknowns.

What can you expect in those important early stages of your outsourcing venture - namely, the first six months?

This quick guide provides an overview of some of the most crucial areas of outsourcing, once you’ve made the decision to partner with JJS.

Relationship Management

You will be assigned a dedicated account manager selected based on their skill set and experience in comparison to your outsourcing requirements. Your account manager will make it their mission to:

• Take care of all queries and questions and organise regular review meetings
• Build an in-depth knowledge of your product part numbering system, descriptions and build processes
• Familiarise themselves with your site, environment and people
• Understand your objectives, strategy and goals
• Create bespoke customer service reports

If your outsourcing project is particularly large or complicated, there will be several other team members involved in your account, including engineering, procurement or compliance teams, but your account manager will remain your go-to person.

These first 6 months may feel a little intense, but with this relationship firmly in place, you can rest assured you are in safe hands from here on.

Supply chain set-up

Handing over complete control of your supply chain takes away the overheads associated with procurement and materials handling as well as freeing up your time to allow you to focus on designing, marketing and selling your products.

We understand that handing over your supply chain requires a high degree of trust, which will naturally develop over time. If you do wish to continue using some of your current suppliers during the transition, there are a couple of options:

1. You can retain full control over your supply chain and continue to buy materials from incumbent suppliers before “free issuing” them to us for manufacturing. We would however still need to inspect, re-label (and in many cases re-package) your items to meet our own internal standards. And as we won’t have control over the supply chain, we'd rely on you to liaise frequently with us on quality and delivery performance so that we can meet the acknowledged delivery dates for your production requirements.
2. If you are keen to retain some control, but want to avoid the costs, storage and management time associated with “free issuing”, then it is possible to nominate your preferred key suppliers (i.e. those critical to your design or those supplying high value/single components) to us. Although we would work directly with your suppliers, you would still find yourself responsible for top-level supplier management reviews.

When it comes to supply chain set-up, particularly during the first six months, confidence and trust are key. In time, you will naturally acquire more of these, and like the majority of our long-term partners, will feel more comfortable in handing over full control to JJS for your entire supply chain.  

Material Inspection

Once you’ve determined how much of your supply chain will be outsourced, JJS will start to raise annual commitments and schedule purchase orders for the material needed for assembly. Our logistics team will inspect each item against our internal standards and procedures - a process that can be briefly assigned to one of two categories:

Our policy dictates we buy directly from manufacturers or through franchised distribution, and all electronic components we receive undergo both a cosmetic and dimensional inspection. In simple terms, we are looking to ascertain if something is what it’s meant to be - the right part, in the right quantity, and the correct revision - and that the paperwork, labels, date codes and external packaging all match our expectations. If we have to source material outside of franchise, we will always let you know in advance. We believe in full transparency and will always involve you in the decision.

In addition to checking the basics (quantity delivered, paperwork, external packaging, etc.), all made-to-print items, such as printed circuit boards, metalwork and plastics are inspected against their drawings. Our logistics team, supported when required by the engineering department, will check that the finish, material and dimensions all match those listed on the drawings. Working closely with a range of customers and suppliers, we have developed our own cosmetic specification document that we can share with you.

All material that passes inspection is booked into our system, given a unique batch code label and then stored securely until it is required in the manufacturing process.

Data

In order to produce your initial quote, we will have already received some form of build pack from you, which should have included all the data pertaining to your product. At the quote stage, certain gaps in data don’t necessarily hinder our ability to respond back with a price - but when it comes to the assembly process itself, these will need to be filled. A lack of data, or incorrect data, can impact production and delivery times, so it’s important to be thorough and check that the build pack you send to us is complete and verified.

Working closely with our customers we have found that a degree of “local knowledge” builds up across their shop floor staff and the build pack they have on file may not always entirely match what happens in practice. It’s wise to make sure all this valuable knowledge and experience has been captured within your current documentation before you start to hand things over.

Using the NPI module within the FactoryLogix software by Aegis, we create our own comprehensive build packs, regardless of how complete your data is. This gives us confidence that we haven’t missed anything and that the information we need for our own internal processes and procedures is present and correct.