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Editor's Note: This article originally appeared in the December 2012 issue of SMT Magazine.Today, more than ever, OEMs are required to get new electronics products to market faster while continuing to improve profit margins. While this is especially true for consumer products, in every market, manufacturers are also dealing with pressure to reduce costs. The ever-increasing need to simultaneously balance top-line growth and manage cost savings underscores the idea that speed is critical to competitiveness. Constant pressure to achieve competitiveness can be seen in a number of trends affecting new product development and supply chain optimization--key parts of the equation. It is critical that innovation occurs, with the end game in mind, throughout every step of the process, from design to production to logistics to supply chain management and beyond, considering requirements for aftermarket services.
New Product Development
To convert innovative thinking into a real product requires an incubation period during which a product goes through different phases of validations: Engineering, design, product, and low-volume manufacturing. It is then, at the very beginning, that the entire life cycle of a product must be considered. It is also essential, at that time, to have a fast, turnkey solution for components, along with plastics and mechanicals and anything else is required.
OEMs have increasingly come to rely on EMS companies that can provide end-to-end solutions to help improve innovation, cost reductions, quality, and, most importantly, time-to-market. All of these factors come together initially in the new product development process. One of the most significant trends is the OEM’s desire to shorten the product development process. OEMs are looking to address this issue by reducing the physical distance between design engineers and the development and build team, which is often a function of an EMS provider. This proximity enables the OEM’s new product design, leadership, and marketing teams to shorten the time they spend in travel, communications, and the approval process. It also allows them to more closely monitor the security and protection of intellectual property.
For instance, a great percentage of electronics OEMs have their design teams in California’s Silicon Valley. Companies that may have once expected to conduct new product introduction (NPI) in a low-cost region in another part of the world are now looking for those services in Silicon Valley. Not surprisingly, each only wants to entrust its new products and proprietary technologies to a great EMS partner, one with superior and modern equipment, the best test lab facilities, and the most exceptional people, all in one location. OEMs want the ability to safeguard their new products with state-of-the-art lockdown security and complete confidentiality. OEMs also expect on-site advanced engineering teams to help develop products. These teams work together with the OEM’s designers to provide a wide array of support including engineering, design for manufacturing, test development and validations, technology and process qualification, and reliability testing. Early engagement with the EMS engineering team, at the opportunity and concept stage, allows for the development of automated manufacturing solutions that enhance cost savings for the OEM customer. Design for manufacturing and being able to prove it early is the key to creating efficiency throughout the process. That, coupled with world-class supply chain management, separates the winners from the losers. If desired, a strong EMS partner can provide a design team with an unprecedented level of success, supporting start-ups and supplementing the design staffs of the bigger OEMs--especially if a broad range of design services including CDM, JDM, and ODM with defining systems and architecture are required.
Another expectation for makers of high-tech products would be access to the best equipment available. Attributes should include:
- Must be capable of servicing a wide application need and exceeding emerging technology requirements.
- Must be flexible enough to span across all product ranges from high density, small form factor through large, complex infrastructure and industrial requirements.
- Must be quality focused with bleeding-edge manufacturing equipment and advanced inline optical inspection stations.
- Must be prepared with rapid equipment that has been through the introduction of offline software applications to ensure valuable NPI line time is not wasted, which can be accomplished through offline machines programming and simulations of processes.
Finally, OEMs are looking for EMS partners that share their passion for innovation and success. This is an extremely exciting time in the industry as manufacturers push the boundaries of technology and help bring disruptive products and technologies to the marketplace. Everyone involved in the development team needs to feel the urgency to achieve the next product launch quickly and with the highest quality product possible. Proximity and even co-location are required. The result of having all these capabilities in one center of excellence for NPI is a very flexible and secure way that the OEM’s developers can work in real-time debugging new products with their partners throughout the design for manufacturability and prototyping processes.
Faster Supply Chain Execution Another strong factor in ensuring products get to market as quickly as possible and at the lowest possible cost is having access to a fully-optimized supply chain. Having complete visibility of the supply chain from end-to-end is critical to ensure the demand plan is in sync with the procurement execution and supplier sourcing strategy. It also enables management to mitigate risks in distribution because the OEM can see the manufacturing locations and options, highlight single-source risk parts and react quickly to events--often, in real time. If the OEM selects an EMS company with a strong global presence and unmatched supply chain management capability, each will also reap the additional benefits of tax and export expertise, as well as a broad worldwide supplier network. Typically, the bigger the global footprint of the EMS partner, the better the OEM’s purchasing and negotiation power with suppliers. As a result, the cost savings realized is greater than in other models.
The product or technology’s launch into the market can be accelerated when essential actions are taken by the EMS partner, such as:
- Validating part numbers in the component engineering and bill of materials.
- Ensuring a quick response to acquire materials from local distributors and other sources.
- Demonstrating an ability to use global leverage for parts that are not available locally.
- Managing inbound flow of materials through tracking, routing, reporting, and physical management.
The product development phase is also a critical time to establish supply chain optimization, as it goes hand-in-hand with engineering development. The EMS company can collaborate with the OEM at the start to set the approved manufacturer list for components appropriately, get manufacturers qualified, align the suppliers to a sourcing and flexibility plan, optimize cost, and drive negotiations up front. Once a product is released, it is extremely difficult to make significant changes in component manufacturers.
The partnership between the OEM and EMS companies at the beginning of the product life cycle enables the team to align technology and processes, develop roadmaps, engage in early design reviews to improve product performance, and build the manufacturing test proposal. A vertical integration approach up front means the OEM will have an optimized supply chain and a cost-effective end-to-end solution. Responding to customer needs and trends in the marketplace, Flextronics has created a new Product Innovation Center at its facility in Milpitas, California. The center offers complete new product introduction solutions including PCBAs, system integration, in-house mechanicals, and tool-less plastic rapid prototyping, as well as completely secured assembly areas and confidential rooms for customer’s engineers to work on the products in real time. This fully vertically-integrated, quick-turn center is complimented by an in-house lab and supported by design and test teams. To ensure fast turnaround time in prototyping, the company has developed key partnerships with renowned and trusted suppliers globally to guarantee fast delivery of parts and materials. The goal is to provide a 24-hour turnaround time on assemblies with consigned material and a 72-hour turnaround on turnkey prototypes. To ensure customers in all the major manufacturing regions of the world have similar support, the company is expanding capabilities with similar centers in Zhuhai, China; Althofen, Austria/Monza, Italy; Migdal HaEmek, Israel; Guadalajara, Mexico; and Dallas, Texas. These centers are geared to provide all the capabilities required for successful product launch and a competitive end-to-end solution. These centers are supplemented by other significant NPI capabilities in Valencia, California; Charlotte, North Carolina; Austin, Texas; Sorocaba, Brazil; Cork, Ireland; Tczew, Poland; Timisoara, Romania; Penang, Malaysia; and Shanghai and Suzhou, China. The network provides end-to-end solutions for customers, covering the following capabilities: Product design, test development and validation, value engineering, design for manufacturing, tear-down analysis and reliability testing, industrialization, and ramp to high-volume production. The centers are designed to support a collaborative model of outsourcing and cater to the needs of all market segments, including those with unique quality and certification requirements such as aerospace and defense, medical, automotive, and energy. Specifically, the centers:
- Provide customer value through cutting-edge technology.
- Develop centers of excellence for next generation technology and process design.
- Reduce time-to-market for new products.
- Develop market entry strategy--product qualification and certification.
- Support global level product launch.
For many years, OEMs have sought to outsource as a way to reduce costs and increase supply chain productivity. What has been learned over time is that those who are truly successful partner with their EMS providers for design, product innovation, and end-to-end supply chain management. Simply put, a strong partnership between an OEM and the EMS partner at the earliest possible moment creates incredible value and unmatched cost savings for the OEM, especially when coupled with a complete supply chain management solution. Mike McNamara is chief executive officer of Flextronics, an industry-leading Fortune Global 500 EMS provider with more than 200,000 employees and operations in 30 countries. Previously, he served as the company’s COO and president of Americas operations. McNamara joined Flextronics through the company’s acquisition of Relevant Industries, Inc. While there, he served as president and CEO. Under his leadership, Flextronics doubled revenue from $15 billion in 2006 to over $30 billion in 2008 and he led the $11 billion acquisition of Solectron, one of the largest in the industry.