Circuits Assembly - July 2008 - (Page 37)

Domestic Production Figure 1. Lean practices such as point-of-use materials help Fawn Electronics’s North Carolina facility offer a competitively priced manufacturing solution. Figure 2. Odd-formed parts are placed on a drop-load line. some manufacturing projects. Fawn Electronics (fawnems.com), like many other mid-tier EMS players, has developed strategic alliances within China to facilitate transition of projects that make sense for that region. The key is determining what constitutes the best-fit build location for a given project. Regional Alternatives Mexico has grown in attractiveness as one alternative, and regional US manufacturing options are increasing in attractiveness as well. Travel and logistics costs tend to be lower within both these options. While Mexico’s labor costs are lower than those of the US, the lower cross-border logistics costs and turnover rates keep US firms in lower labor-cost regions fairly competitive in this equation. Convenience and timeliness are also factors in many programs. The ability of customer engineering teams to drive to a facility in a few hours, versus traveling for several days, influences some regional outsourcing focus. Time zone compatibility and common language are also points of convenience that some OEMs deem important, particularly in new product development cycles. Case by case, the reasons are myriad for product returning to US shores. An OEM manufacturing a product in Thailand chose to reevaluate its sourcing strategy. Drivers for considering a move back to domestic manufacturing included a six-month lead-time for engineering change notifications to be implemented, inconsistent quality, high numbers of unplanned trips for problem resolution and a large lot size requirement dictated by the supplier, creating unwanted inventory. When those costs were analyzed against a higher domestic unit price, domestic production appeared cost-competitive. In another example, a project sourced in China expecircuitsassembly.com rienced a drop in demand. The China source refused to continue to supply at lower volumes, ultimately forcing a move back onshore. Products manufactured in Europe but sold in the US also are becoming candidates for US production because the falling value of the dollar has made domestic manufacturing more cost-competitive. In this particular example, an added value was the opportunity to move repair depot and end-market support to the US company manufacturing the product. While offshore sourcing has helped put many products in reach of a far broader base of US consumers, it also has cut available US manufacturing jobs. One need look no further than the campaign rhetoric of the current elections to see the general public is starting to realize a service economy doesn’t give them the same upward mobility and job security their parents enjoyed. “Made in USA” is once again becoming an effective marketing technique because a growing number of consumers realize cheap imports do carry hidden costs. Greater scrutiny is being placed on sourcing decisions for defense, aerospace and homeland security-related products. From both a security and political standpoint, there is value in sourcing critical components within the US. OEM decision teams continue to be driven by a need to get best value for price. If they perceive that high quality, ethical practices, schedule flexibility, supplier responsiveness and speed of product realization offset the savings they find in the lowest-cost labor markets, they will outsource with US EMS providers. However, if that case isn’t made well, they won’t. The five Rs are critical in driving business growth at the mid-tier EMS level. Without a track record of performance, they don’t exist. n Art Rutledge is president of Fawn Electronics (fawn-ems.com); art@fawn-ind.com. Circuits Assembly JULY 2008 37 http://fawn-ems.com http://circuitsassembly.com

Table of Contents Feed for the Digital Edition of Circuits Assembly - July 2008

Circuits Assembly - July 2008 Contents Caveat Lector Industry News Market Watch Talking Heads Focus on Business Global Sourcing On the Forefront Screen Printing Tech Tips Will Electronics Follow the Sun? ‘Warm’ Manufacturing Heats Up Reputation Trumps Recession, China ‘Web Circuits’ A Novel Non-VOC Conformal Coating Krypton: Benchmarking Customer Satisfaction 2008-09 CIRCUITS ASSEMBLY Buyers Guide Wave Soldering Pb-Free Lessons Learned Process Doctor Materials World SMTA Int'l Product Preview Ad Index Assembly Insider Technical Abstracts

Circuits Assembly - July 2008

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