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A standard process for developing an action plan should be used across the EMS firm's customer base.

The initiative behind the RoHS Directive has the same potential impact on the EMS provider as the OEM: the opportunity for revenue loss. The potential loss for companies trying to maintain a leaded product is tied directly to component obsolescence. This is primarily a result of component manufacturers discontinuing parts to transition to Pb-free. In essence, component manufacturers are using this as an opportunity to pare the number of components they have to manage.

The EMS business model dictates that the provider serves many masters. Regardless of the size of the organization, each customer has different strategies and requirements with regard to maintaining leaded products. This can make managing each customer's requirements challenging. ACC Electronix's approach has been to standardize the process used to manage the different needs. Although simple in scope and straightforward to implement, this process has the flexibility to meet the specifics of each customer. However, it has far-reaching consequences if not executed correctly.

The most important step in the process of maintaining the leaded production of assemblies is to define the customer's critical necessities. Customer requirements vary based on the industry in which the OEM competes. In some instances, maintaining legacy products has high importance. For example, automotive OEMs are typically required to support a product for 10 years after production has ended. Most times these products get minimal attention, as products in volume production or new launches are the main focus of the OEMs and EMS providers. Another example is the medical industry, in which the goal of the OEM is to maintain the existing design of a product for as long as possible to avoid the lengthy and costly process of re-qualifying the product with the FDA or other regulatory bodies.

Other items that affect an OEM's requirements include:

1. Marketing and product strategies.

2. Availability of resources.

   1. Team members.
   2. Design/development.
   3. Financial.

3. Revenue (product/market share).

4. Product(s) lifecycle.

5. Access to analysis tools.

6. Time constraints.

7. Product qualification criteria.

Customer requirements are used to define the project and resources required to support it. Also, this enables the EMS provider and its customers to set appropriate expectations.

Project Definition

It is important to begin any major initiative with senior management sponsorship from both customer and supplier. The project will be difficult to manage and complete in a timely manner without the buy-in from management.

Step 1: The team. Both organizations need to identify their respective team members. The EMS provider team should at a minimum include program management, purchasing, and process/product engineering. The OEM's team should be made up of members from purchasing (the buyer responsible for EMS provider), materials, design engineering and quality. Sales and marketing will need to be part of the OEM team if decisions about product strategies are considered part of the scope of work. It is beneficial to have individual team members familiar with each organization and products. The roles for each team member should be well defined. This will help the team spread the work more evenly so that no individual is overloaded. In some cases, a third party may be engaged to supplement the program or fill in where there is a resource shortage. It is critical to integrate the third party similarly as the rest of the team. This allows team members to be more effective while driving project efficiencies.

Step 2: Assemblies/products. Define all products and assemblies that will be included in the analysis. It is important to understand if the OEM has assemblies not visible to the EMS provider. These may be, but are not limited to, legacy products. These assemblies are typically built infrequently, but are important in supporting a requirement placed on the OEM by its customer or by the industry it competes in. New product development should be addressed at this step.

Step 3: Priorities. Define the order of importance by product or product family. This will be driven primarily by the OEM because it has the broadest visibility of products and associated revenue streams. A timeline for each product or product family should be developed during this step. This will ensure the OEM and EMS provider are correctly applying their focus and resources. However, priorities should remain flexible since more information will be discovered during the project that may constitute a change to the timeline. The goal of this step is to mitigate the risk of significant revenue loss for both parties.

Step 4: Resources. Typically, the team will need additional resources to complete the project. The resources to support this analysis need to be defined to establish the expectations of the two organizations. The parties need to determine who will provide:

• Design services.

• Component engineering.

• Analysis tools (component lifecycle).

• Financial services (last-time buys, outsourced processes, expedites, etc.).

• Subcontract services.

Resources beyond the aforementioned list may be required based on the complexity of the assemblies or the product. Additional resources may be the byproduct of an aggressive schedule.

Step 5: Risk mitigation. The OEM needs to determine its strategies to mitigate the risk of product obsolescence. Three primary strategies can be deployed. One strategy may be to perform last-time buys on components being discontinued by the manufacturer. This strategy will most likely be used for legacy products or to bridge the gap until the redesign of the product is complete. The second strategy is for the OEM, EMS provider or a third party to redesign the product. This requires a product transition plan for each assembly that details the action items, responsibilities and the timeline for each program. The third strategy is to use both lifetime buys and redesigns. This approach is used when there is not enough time to redesign the product. The goal is to purchase enough material to permit a smooth transition between the old and redesigned product. It is important for the EMS provider to define its role and responsibility in each of these strategies, as each one has an associated cost impact.

To mitigate future risk, the EMS provider should enlist its customer to transition to all RoHS-compliant components if Pb-free versions are available.

Implementation. A final review should be conducted on the overall project definition to ensure each step can be supported. Any discrepancies should be noted and resolved before the program is launched. Implementation should begin once the program review is completed.

Once the project has been defined, management buy-in at both the OEM and EMS provider is crucial to the success of the project. Furthermore, it is important for management to understand the timelines and risk associated with the project. The expectations should be set at this point in the process. The objective is to avoid any surprises.

EMS providers are experienced at managing diverse requirements from customers. The process of supporting the customer's product in a leaded environment is no different. However, a standardized process to develop an action plan should be used across the EMS provider's customer base. The success of the program is critical to both parties since the revenue impact can be significant if a product has to be discontinued (with no replacement) or delayed. The OEM and the EMS provider can minimize its risk with a thorough plan.

Case Study

One of ACC's customers is in the mining products industry. This customer's products are low volume and high mix. The industry in which the OEM competes requires the customer to support its products 10 years after final production. Since this is a high-reliability industry, the product qualification process is long and expensive. ACC is the sole EMS provider to the customer and has not built every legacy product for this OEM because of low-volume requirements coupled with current inventory at the customer.

The mining customer's team consisted of purchasing and engineering (designers and management). The purchasing manager, program manager, and operations manager from ACC participated. Individuals on the teams worked together in the normal course of business. The only exception was the OEM's engineering management.

The products were divided into three categories for the initial planning session: legacy products, production and development. As mentioned, ACC did not have visibility of all legacy products and all products in development. This meant component obsolescence issues may have existed prior to the RoHS transition.

The product priorities that resulted from the initial analysis are listed from highest to lowest priority.

1. Current production.

2. Legacy products.

3. Product development.

The OEM set priorities based on mitigating the risk of revenue loss due to product availability. The OEM's goal was to minimize the potential of not being able to ship a mining truck, which represents a significant cost compared to the cost of the electronic modules provided by ACC.

The next step was to determine what additional resources were needed and which organization would be responsible for supplying the resource. Several resources were used for the project.

• Distributor software tool.

• Manufacturer Websites.

• Distribution sales representatives.

• Manufacturers' representatives.

• Design engineering.

• Financial.

In this case, ACC supplied most of the resources, with the exception of design engineering and financial resources. ACC used the distribution software to perform the initial analysis. Other resources had to be used since the software was limited to components for which the distributor had franchise rights. The balance of the components was investigated and qualified through manufacturer Websites and sales representatives from the distributor or manufacturer.

The OEM's risk-mitigation strategy was simple and straightforward. Last-time buys were used to minimize risk across all types of products. On legacy products, enough material was purchased to extend its life through the 10-year product support period. Last-time buy quantities were sized to permit the product to be redesigned and production released. The new designs had to be modified to use available RoHS components. The OEM approved the transition to RoHS versions of components provided they were available. This was implemented to minimize the potential of component obsolescence in the near future.

The OEM paid for any cost associated with last-time buys. This strategy worked well in this case because of the OEM's low volume, high mix of product.

Management from both organizations participated in the entire process. Therefore, program buy-in was created throughout the process.

Ed.: This article was first published in the SMTAI 2006 Proceedings and is reprinted here with permission.

Curt Williams is vice president of sales and marketing at ACC Electronix Inc. (accelectronix.com); cwilliams@accelectronix.com.

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