-
- News
- Books
Featured Books
- design007 Magazine
Latest Issues
Current IssueLevel Up Your Design Skills
This month, our contributors discuss the PCB design classes available at IPC APEX EXPO 2024. As they explain, these courses cover everything from the basics of design through avoiding over-constraining high-speed boards, and so much more!
Opportunities and Challenges
In this issue, our expert contributors discuss the many opportunities and challenges in the PCB design community, and what can be done to grow the numbers of PCB designers—and design instructors.
Embedded Design Techniques
Our expert contributors provide the knowledge this month that designers need to be aware of to make intelligent, educated decisions about embedded design. Many design and manufacturing hurdles can trip up designers who are new to this technology.
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - design007 Magazine
Thinking Inside the Box for a Change
April 10, 2024 | I-Connect007 Editorial TeamEstimated reading time: 5 minutes
In this interview, Joe O’Neil discusses the growing importance of box build from an EMS provider perspective. Supply chain disruptions and the desire to offer more value to customers have fueled interest in box build. Additionally, mass customization is emerging as a trend, allowing for personalized product variations. While Tier 1 companies have mastered this approach, Tier 2 and 3 players hold significant opportunities in the industrial space.
Nolan Johnson: Joe, from an EMS perspective, is box build growing?
Joe O’Neil: Yes, and the global events of the past four years may have led to an acceleration of a natural progression wherein EMS players continue to expand, moving further upstream––or downstream––as they figure out their niche in the EMS provider space.
In terms of customer retention, box build was very sticky for us over the years. The supply chain disruption and getting your hands on the later stages of the product as it went through the transformation process increased in importance. Providing more value to the customer through box build is a good reason to get into it. There can be some factors you can put into your in-region vs. low-cost-region calculator to determine where it makes sense for OEMs to have their product built.
Another driver on a macro level is mass customization. This is the ability to build in-region and provide options for the “31 flavors” of your product. Now, customers can decide what configurations they want today and get them tomorrow. It is a major differentiator for the OEM, and also an opportunity for the EMS suppliers to capitalize on proximity.
Johnson: How much is that style of built-to-order business growing in electronics manufacturing?
O'Neil: It's surprising in the industrial space. Think of the maturity of the Dell model. You can configure your laptop, and it shows up the next morning. That’s pretty impressive. The Tier 1 companies have been executing quite well in this space. My perspective is shaped more by the sub-$100 million EMS supplier folks.
Johnson: Tiers 2 and 3 are probably where the most interesting stuff is happening.
O'Neil: That’s where the opportunities lie. Certainly, the U.S. is where the largest pool of players is. While there are new service opportunities, in-region fulfillment presents some challenges, or at minimum, some things to consider before you jump into a very capital- and facility-space-intensive sector of the business.
Johnson: Is it labor intensive?
O’Neil: Yes, but it’s no harder than staffing SMT lines, or finding skilled, qualified engineers for that role. This is one of those areas where you can find talent in adjacent industries and pull them in. So, it’s one of the easier areas to find talent vs. the usual dynamic of EMS guys stealing labor from each other. While the labor pool is a little bit broader, the cost of quality is certainly higher.
Barry Matties: Isn’t box build more employee-dependent, or is automation really a factor there?
O’Neil: Box build comes in a lot of different flavors. There are places for automation, especially in the high customization piece. The ability is there, for example, to have a robotic arm turning screws. But the lower quantity, higher customization, just-in-time type of service better lends itself to labor.
Johnson: U.S. companies might be looking at box build to increase their revenue, but does it improve their margin?
O’Neil: You may lose a point or two in your percentage of margin, but in terms of hard dollars, it can be quite profitable. You can stack your margins a bit. Keep the traditional board-level business where overheads and everything are already calculated. Then, perhaps, add more overhead allocation as you go upstream, delivering higher levels of subassemblies and even final assemblies. But it cuts both ways: Your top line is growing, but your time-to-revenue, inventory, carry, and cash-to-cash cycle will be extended.
Many EMS companies operate on a purchase order-to-purchase order model. When you get into this higher level of engagement with an OEM, master service agreements become increasingly important.
We all know the example of the $10,000 screw or the $10,000 resistor. You have 99.9% of the bill of materials, and that’s great, but you can’t build it until you have 100%. With box build, that sub-penny part isn’t holding up a couple hundred dollars on a board; now it might be holding up tens of thousands of dollars of a system. Put a couple hundred of those stuck jobs together, and it can get real dark really quickly.
You’ll need to have your inventory controls really tight, and you’ll have systems visibility on multi-level BOMs, and what-if scenarios. It’s a different level of system and maturity when you go from 100 boards to 100 boxes. Are you building out 19-inch racks for a customer? If you’re doing 100 racks a day, and you bring in two weeks’ worth, suddenly you might have just filled a quarter of your facility with pallets. Then you have ESD, foam boxes, packaging pallets, the loading dock—it’s a major impact on a facility and not something you can go into overnight.
If you want to make box build part of your core value proposition, then you must understand your cash-to-cash cycle—your supply base. As we went through the supply chain ripples, people got gun shy about just-in-time deliveries and quickly pivoted to adding more safety stock and increasing inventory levels. Everyone relaxed in terms of inventory efficiencies. However, when you manage these higher-level assemblies, you may need to consider returning to just-in-time delivery practices. You need a good vendor-supplier management program.
With an in-region supplier, those challenging parts can be fed upstream into your supplier base. Now you don’t need to bring in two weeks’ worth of those racks. You can agree to 100 a day, transform them, and ship them out. The next day, another 100 show up, but it requires that you have vendor management in place and some reliable local partners.
Continue reading the rest of this conversation in the April 2024 issue of SMT007 Magazine.
Suggested Items
RTX's Pratt & Whitney Canada and Angola's TAAG Airlines sign Fleet Management Program Agreement for PW150A Engines
05/01/2024 | RTXPratt & Whitney Canada and TAAG Angola Airlines E.P., Angola's state-owned airline, have signed a six-year Fleet Management™ Program (FMP) agreement. The engine maintenance services cover the airline's PW150A engines which power their fleet of Dash 8-400 regional turboprops.
GPV’s Q1 2024 Interim Financial Report Shows Strong Navigation in Uncertain Times
05/01/2024 | GPVDanish-based GPV recorded an expected drop in sales to DKK 2.3 billion for the first quarter of 2024. The decline also affected the operating profit, which was DKK 155 million compared to DKK 179 million in the same quarter last year, although the EBITDA margin was maintained. In general, demand has been softer in 2024, but GPV continues to invest for the long-term and expects the trend to turn in the second half of 2024.
Celestica Announces Q1 2024 Financial Results
05/01/2024 | CelesticaCelestica Inc., a leader in design, manufacturing, hardware platform and supply chain solutions for the world's most innovative companies, today announced financial results for the quarter ended March 31, 2024 (Q1 2024).
U.S. Companies Invest Heavily in Robots
04/30/2024 | IFRManufacturing companies in the United States have invested heavily in more automation: total installations of industrial robots rose by 12% and reached 44,303 units in 2023. Number one adopter is the car industry followed by the electrical and electronics sector.
IMI Championing Collaborative Partnerships
04/30/2024 | IMIIntegrated Micro-electronics, Inc. (IMI) held its virtual 2024 Annual Stockholders Meeting at Fairmont Hotel Makati on Thursday, 25 April 2024.