Engineers looking to scale up production are victims of their success if they don’t have a long-term supply chain plan.
The situation: Your engineering team is looking to move from idea to production. You reach out to a contract manufacturer. Question: When does it begin to feel like a partnership?
As a business owner or engineer, working with a contract manufacturer can be daunting, particularly if it doesn’t have experience sourcing challenging parts in a challenging market. How can we as a community of manufacturers help solve this problem? We must put in the time to clearly identify the challenges, set aside time, and build resources to assist customers in real time – and offer a stratified path to a solution based on the type of client. Sounds easy, right? But don’t flinch when it comes to defusing bombs.
Recently, customers have tapped us to bring production to the US from Asia. These customers have been using turnkey, rapid-turn, low-volume solutions and are now looking at scaling production to about 1,000 from less than 100.
They just have one problem: flaws in their designs. Don’t get me wrong. Their designs work great and have been tested and retested with evolving firmware and investment as they have progressed through design and prototyping stages. They’re now looking for 500 to 1,000 boards. The quantity makes them a victim of their success.
Finding 50 ICs right now can be difficult. Finding 1,000 can be a 56-week lead time bordering on forever. This situation isn’t acceptable for early-stage companies or companies rushing to complete designs to fill market needs for their products. It literally can be life or death.
It is our experience many production shops will enable this walk down a dangerous path, not intentionally but because sourcing is not completed in a holistic manner. They are grabbing parts to build the order, not planning for the future. The cost associated with the path I’m proposing is certainly steeper as a manufacturing services provider, but the wins for customers that have previously whistled past the graveyard make them lifelong clients.
The sourcing approach, rather than the cost of the product or service provided by a supplier, is part of supply chain management and emphasizes customized results and strategic partnerships. In addition, emphasis on building meaningful buyer-supplier partnerships promotes collaboration, accountability, and innovation throughout the supplier lifecycle. Ultimately, this approach achieves the overall goal of strategic sourcing: to reduce costs while improving the efficiency and reliability of the supply chain. I walk the halls and repeat the same words daily: “Add value at the very first step.”
Alert Tech SMT offers a projected purchasing plan with its quotations, highlighting the components that are hard stops for various volumes on the one-year and two-year roadmaps. This isn’t usually a warm, fuzzy moment in the quotation presentation. We’re talking red lines on BoMs the customer has never seen before. Not because there was never a problem, but because they have not been exposed to the reality of lead times at scale. (“Mouser shows 150 on hand! What is the problem?”) Not what we envision for our quote delivery meetings.
The only thing your customer can’t afford is out-of-date or incorrect information. Bringing that information to them is step one. Step two is solving the problem. We have been fortunate to be able to point to what our customers are competing with in the market for their components. Broadcom BCM2837B0 or ATmega328P were chips they selected because they were familiar with them on Raspberry Pi or Arduino. Bad news: Their team wasn’t the only one with that idea.
The 0603 resistor is much harder to source now than the 0805. Why did they pick that part? It takes a bit more time in the weeds than many shops seem to be used to spending. These customers are smart. They are solid engineers, but they aren’t familiar with scaling production. As a community of manufacturers, we are. I suggest putting in the additional work on these BoMs to pull together alternative parts and packages that can be a clean kit much quicker, suggesting proactive purchases and blanket POs to round out the future needs.
For some customers with a full team behind them, this will be enough to set them on a quick path to reposition their BoM. Does this fix the problem for most? Unfortunately, no.
The most common reply is “these are the components our product needs, and we don’t have the resources to reengineer software and hardware to work in alternate parts.” And this is where the road forks.
Some of these customers don’t have on-staff engineering to handle these changes and will not be able to scale their builds unless they find those resources. These are typically small customers. I have helped startup customers source consulting engineers on the terrific platform UpWork to help them over this hump. Being on a call with these consulting/contract engineers to explain the problem on behalf of customers can cut down the time to their success, as well as move them along in the business pipeline. It is win-win.
For customers who see the problem for what it is – nonnegotiable in many cases – and have the resources to move quickly, we offer in-house engineering services to ECO design changes and open the alternate parts.
We have repeatedly warned customers against continuing preproduction builds, hoping their component availability will improve before mass production. The best time to pivot was yesterday; the next best time is today. Many of these parts will be in the red for another year at least. If they are successful in their sales and suddenly must scale up, they will potentially make on-the-fly changes to hardware and software to fulfill demand without proper design process and testing. Looking at the problem through the eyes of our customers, but with our experience, getting 1,000 boards and determining they all need rework: That is the worst-case scenario for them, the cold sweat moment when they have to “make it work” because they don’t have the resources to scrap that order.
Drop-in replacements aren’t always available. If you haven’t considered having a firmware engineer in your factory before, investigate the opportunity. We help move our customers past roadblocks that are often much less of a hurdle than they appear at first glance. Often there is greater component availability moving to a smaller on-chip memory or reduced on-chip capabilities from the same semiconductor manufacturer that satisfies the customers’ needs and requires less software engineering than expected. Having talented firmware engineers on staff has been key to unlocking doors.
Customers of all sizes are facing business risks around their manufacturing that is unprecedented. The slow slide of manufacturing to foreign markets once looked flawless on planning documents in board rooms around the country. That day is past. The turnkey fast-turnaround board shops will not have the time or economics available to put in the extra effort. The best time to start building value for customers is now.