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Perfected automation, not outsourcing, is the key to profitability.

For some time, outsourcing electronics manufacturing to Southeast Asia, particularly China, has been the rage. The siren's call of large profit margins that could be realized from low labor costs seemed as irresistible as triple chocolate dessert. Although a significant amount of business is still outsourced to China, particularly by the big players, work has begun coming home.

Increasingly, Western electronics manufacturers are learning, like Oz's Dorothy, that when it comes to profitability and quality, there is no place like home. Indeed, the entire range of manufacturers - from smallest to largest - can do better right here if they optimize their manufacturing processes. This will become increasingly true as electronics assembly enters the post-RoHS and WEEE era. In the imminent future, process control and quality focus will be key issues in soldering and circuits manufacturing.

Outsourcing to China means sending increasingly complex and difficult-to-manufacture assemblies halfway around the world to be built using unknown equipment by unseen companies and faceless personnel. Shipping costs, time, potential damage, quality issues, loss of control and other factors conspire to reduce or eliminate any low-cost labor profit gain. Product that returns defective must be reworked or scrapped. Rework is quite possibly the biggest profit-eater in the entire assembly process. Try taking your problems to the complaint department of that nondescript factory somewhere on the outskirts of Suzhou!

There is a better way. Optimizing the manufacturing process locally, where knowledge, advanced technology, and process and quality control are within arm's length, is a better way to profitability and fewer headaches; it beats outsourcing not only for small companies but for the largest as well.

A 2005 study by Bjorn Dahle and Ronald Lasky, demonstrates how U.S. companies can realize higher profits over outsourcing by putting their houses in order and fine-tuning their production processes. This comparison was actually made in 2002, before the challenges of Pb-free assembly had hit home. The authors cite automation as a key factor because automation means higher productivity at lower cost per unit by eliminating labor costs, as well as the uncontrollable variables introduced by human involvement in the manufacturing process. The authors refer to the "stunning effect that productivity has on profitability" and summarize that "it is cheaper and more profitable to improve at home than to send production overseas."

Improving the process at home is not a simple task. If we want to increase the percentage of automation in the process, then we must also ensure that the sophisticated equipment is performing flawlessly and to its manufacturer's specification, without errors or offsets that cause defects or down time and do little to widen the already narrow process window imposed by Pb-free assembly. Machine capability analysis, or performance verification, is the first step; this ensures that all of the equipment in the line, from printers to pick-and-place to reflow, is performing to spec. This is a prerequisite; all other process adjustments and tweaking must follow, because if there is variability in machine accuracy or repeatability, for example, all other process refinements will be meaningless, as true repeatability cannot be maintained.

The cost of not verifying equipment performance and correcting errors will be the slow attrition of profits due to higher defect levels, more rework, lower overall yields and production stoppages, which become truly costly over time.

This is more than theory. Large OEMs use performance verification methodology to certify the high-performance capabilities of their equipment. This is especially important as tolerances shrink and processing speeds and volume demands rise. Speedline Technologies used such tools in late 2004 to verify the alignment and print performance specifications for their next-generation MPM Accela stencil printer. That was the beginning; the list of OEMs and EMS companies using these tools to perfect their production process equipment has since expanded dramatically.

Not only automated printers, but pick-and-place machines, dispensers, feeders, even reflow ovens (profile accuracy) and automated packaging equipment in the AP arena can be fine-tuned and improved using quality tools. A tuned process is the best assurance of a high-yield, low-defect, Lean manufacturing capability. Dahle and Lasky had it right: automation is the key to higher productivity, and thus profitability over outsourcing. The benefits of automation, however, cannot be realized without a fine-tuned process free of the variables that impact repeatability. Once Western companies get their production houses in order, they will realize that the grass - and the currency - is greener in their own pasture.

References

1. Bjorn Dahle and Ronald Lasky, "Production Migration: Do the Numbers Add Up?" EP&P, January 2003.

Michael Sivigny is general manager at CeTaq Americas (americas.cetaq.com); msivigny@cetaq-americas.com.