Ultra CEMS Launch Offshore Manufacturing Process

It is now accepted that some offshore electronic manufacturing sources can produce high quality work at very competitive prices.

There are, however, many obstacles and pitfalls to be negotiated by OEMs who wish to avail themselves of the cost savings, and the initiation and management of arrangements with offshore suppliers can be expensive to set up, costly to manage, and fraught with contractual and IPR issues.

Ultra CEMS has already established relationships with contract manufacturing sources in Malaysia and China, and has built up experience of negotiating appropriate terms. Ultra CEMS can also place work in sufficient volumes to dilute the management overhead costs incurred in the UK.

As a result, Ultra CEMS has decided to offer its customers "painless" access to offshore manufacturing through the introduction of a new "blended" process, which would normally involve prototyping and initial production by Ultra CEMS in the UK, followed by a phased transfer of certain products within the overall product portfolio to an offshore subcontractor when design stability and volumes make this economically viable.

This service will result in significant cost savings, depending on the nature of the assembly, but will require a much firmer approach to design stability, MOQs, and batch sizes than would be applied by Ultra CEMS at its UK facility.

This service will not suit all OEMs, or all OEM assemblies. Designs must be stable and completely documented. Test processes and quality standards must be completely defined. Sales forecasting should be accurate and able to support order commitment.

In addition, component traceability to source is still in its infancy for most offshore suppliers, and the only acceptable security rating is "Unclassified" which may rule it out for some aerospace and military projects.

Process

Ultra will pre-qualify offshore facilities for all aspects of operations including:-

• Production capabilities
• Workforce skill-levels
• Production capacity
• Quality standards
• Build standard control
• ERP system and IT
• Supply chain management
• Traceability
• Ease of interface
• Flexibility
• Financial stability
• Political and environmental stability
• Commercial terms
• IPR protection and non-compete
• Track record and reputation

Assuming a new design:-

Ultra CEMS (UK) will work with the OEM to ensure manufacturability and testability of the product.

Ultra CEMS (UK) will help to trouble shoot the manufacturing and test processes during prototype build.

Ultra CEMS (UK) will build initial production batches while product design stability and repeatable sales volumes are established.

On request from the OEM, Ultra CEMS will negotiate pricing and terms for transfer offshore.

When a supply agreement has been negotiated with the OEM, Ultra CEMS will manage the transfer of the product to the chosen offshore supplier.

Ultra CEMS will deliver product to the OEM and provide a UK back-up capability in the event of severe offshore disruption to supply for any reason.

Ultra CEMS will continue to carry out quality surveillance of the offshore supplier and of the delivered product, as agreed.

Criteria

Not all products will be suitable for transfer offshore. The suitability of any particular product will depend on many factors, but following requests for "Rules of Thumb" to cover this issue, the following criteria are offered as guidelines:-

• Designs must be stable and very well documented at all levels, including BOM (component source(s) RoHS compliance etc.).
• All quality standards including workmanship, material sourcing, RoHS compliance and special production processes must be fully defined.
• All test procedures must be fully defined and portable (reproducible).
• Sales volumes must be already established and likely to be reasonably stable (forecast-able) for at least 2 years ahead.
• For a medium complexity PCB assembly the lowest feasible annual volume will be around 1000 pieces. This quantity will reduce for complex PCBs and wired modules containing PCBs.
• There needs to be a commitment to place a firm order for at least 500 pieces per production batch, 3 months firm, with inventory underwritten for at least 6 months future scheduled production.
• There will probably be an up-front MOQ payment which will be credited against future deliveries
• Three months notice of design changes is likely to be required.
• IPR should be well protected or unlikely to be copied because of the specialised nature of the end product. (See below).

IPR

There is a (possibly well deserved) suspicion that IPR may be at risk in some of the low cost offshore manufacturing regions.

Ultra CEMS will attempt to satisfy itself, by agreement and by inspection, that the chosen source will be absolutely safe in this regard.

Despite this focus however, it is desirable for the OEM not to use this service for any product which is easy to copy, has an easily recognised commercial value, or which reveals valuable trade secrets during the manufacturing process.

Legal IPR protection is in its infancy in most low-cost manufacturing areas, but it is believed to be improving.

Pricing

Using its in depth knowledge of the product, Ultra CEMS will negotiate the best value-for-money price that it can to satisfy the OEM requirement set.

This price and the proposed source(s) will be provided to the OEM following signature of a non-compete and NDA agreement.

Should the OEM decide to proceed, Ultra CEMS will charge a fee for the management of the process on the offshore per-item prices.

Expense costs such as shipping will be agreed on a case by case basis.

There will also be a one-time fee for a Production and Test Engineering team to spend time in-country to transfer and debug the production process. This fee will be separately negotiable for each product case.