Printed Circuit Design & Fab - October 2008 - (Page 38)

outSourcinG THe Wave of the Future Increasing offshore costs give rise to changing global outsourcing strategies. by GrEG PAPAnDrEW There has been a lot of talk lately about the actual cost associated with outsourcing PCBs to Asia. The early promises of lower pricing and higher profit margins made many customers salivate. “Go East” was the rallying cry, and many followed that cry–only to find out the savings weren’t as great as expected and were only a short-term solution. We may never know if the prices that were originally quoted were accurate or purposely deflated, and it really doesn’t matter. Customers are now realizing they need to determine the actual total cost of acquisition for themselves, especially since offshore labor, logistics and fuel costs are rising, and as a result, increasing the total cost of acquiring a PCB from overseas. Because of this customer realization, some of the major orders placed offshore several years ago are now coming back to be manufactured domestically. There are several reasons why we should rethink offshore supply. less than the originally quoted extended lead-times. Material availability and shop loading will raise costs as well, and if there is a spike in demand, a faster shipment method may be required, meaning a higher freight bill. Having completed inventory on-hand could curtail the need for an expedited build and shipment, but maintaining inventory costs money too–and what would you do if there were a revision change or push-out? Currency Fluctuations The value of the dollar has been falling, and tight margins are definitely affected by just the slightest of differences. Higher Labor Costs The results of the successful development of a low-cost nation are that eventually, there will be an increase in the cost of living and a demand for higher wages. Remember Japan 25 years ago? The same thing is now happening in China. All the above factors affect the total cost of acquisition of the PCB orders. But this list does not include the cost of onsite visits needed for initial plant surveys, engineering changes or the need to address quality concerns, nor does it include the considerable investment of time needed to develop and to maintain a successful relationship with an offshore vendor. Another issue to consider is whether to have products manufactured in China or Taiwan. Both countries are experiencing price increases at the moment. However, I believe Taiwan is more stable, both economically and politically. The working wage in China is increasing, the dollar has fallen against the RMB and lead times have been pushed out due to internal demand, natural disasters and heavy government intervention. Both Taiwan and China have been affected by rising fuel costs, but the price gap between the two for the total cost of product acquisition is narrowing. OCTOBER 2008 Customer Order Entry and Planning Unless your product has the words iPod or Blackberry on its face, the days of blanket orders with six-month windows are probably gone. It is not so much that the economy is bad, but rather that customers are hesitant to commit to such large orders. The original, enticing offshore pricing was based on those types of large-quantity orders. Smaller Order Delivery Size and Rising Fuel Costs A significant decrease in customer back orders combined with an inability to make long-range plans goes hand-in-hand with a reduction in the size of shipments. Along with higher fuel costs, these factors increase the final freight bill. Time-to-Market There is more caution when placing purchase orders, and sometimes orders or re-orders may have to be produced in 38 printEd CirCuit dESign & fAB

Table of Contents Feed for the Digital Edition of Printed Circuit Design & Fab - October 2008

Printed Circuit Design & Fab - October 2008 Contents Our Line Market Watch Around the World Happenings Test and Inspection ROI Tip Jar Interconnect Strategies Final Finish Forum The New Wave in High-Speed Modeling The PCB Design Library Mixed Signal Design Considerations Modeling Conductor Surface Roughness Copper Erosion: The Influence of Metallurgy on Copper Dissolution The Wave of the Future Ad Index Building a Profitable Niche Marketplace Off the Shelf BGA Bulletin

Printed Circuit Design & Fab - October 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.