Outsourcing – more money for product development and ROI

Author : Peter Towler, Briton EMS.

30 January 2013

If the DNA of your company is about designing and developing new products, why take on the burden of manufacturing? That’s a strategy question being asked by an ever increasing number of managers. 

As levels of on-board functionality continue to increase, the impact on electronic complexity and manufacture is enormous – and the manufacturing equipment that was satisfactory only five years ago is unlikely to be so today. This is why outsourcing is on the increase.  It’s a great tool for freeing up cash – why invest in buildings, plant, people and components when that money can be used for product development and marketing?

For both established and start up companies, investing in high speed PCB and surface mount equipment takes serious money, making a return on the investment difficult.  A fully automated SMT line with pick and place, fast inventory changeover and associated ovens and printers is well over £½m.

Outsourcing simplifies a company’s business model – engineers and other staff can concentrate on what they are good at, without being involved in non-core activities, which make little contribution to the company’s success. And while it concentrates on what it does best, the outsource partner will take responsibility for what it is good at: all aspects of manufacturing: staff, automated assembly lines, component sourcing, testing and delivery.

The outsource partner will also bring significant ROI benefits – the overall cost of outsourcing is always going to be less than the investment in expertise and equipment required to make cost competitive products in house.

A practical example
With the age of the electric car finally dawning, it brings with it a new device: the purpose designed charger and charging station. The company leading the way is Chargemaster, which has designed a multi-vehicle, multi-style range of chargers for street, car park, office and home use.  But it doesn’t make them.

David Martell, Chargemaster’s chief executive, was the initiative behind Trafficmaster Plc, which he sold in 2004.  The knowledge gained from that enterprise of setting up a transport infrastructure project went into Chargemaster when he founded the company in 2008.  Already about 1,000 units have been installed in the UK and Europe and it has a target of installing its 2,000th charging station by the end of 2012.

To manufacture the units, it turned to Briton EMS – a UK contract electronics manufacturer. Martell summed up the benefits by saying “We liked the flexibility to switch production to different Chargemaster models as sales and markets dictate – this is made necessary by the differing requirements of our overseas markets.”

Flexibility is just one aspect of manufacturing a range of products, which do the same job but have to meet different market needs – the other is the complexity of the product. In Chargemaster’s case, what looks like a simple box build is a robust steel and aluminium case containing circuit boards, up to 40 metres of wiring, well over a hundred connectors and, depending on the model, 10 to 15 wiring looms.

Chargemasters are also future-proofed – all the appropriate wiring and internal structures for upgrading to different charge rates and sockets are included in every unit; RFID modules can also be added for local councils and other owners who fund the posts by charging users for electricity. Because of the volumes and complexity of the Chargemaster project, Briton set up a dedicated manufacturing cell staffed by engineers who wire up, assemble and test each unit; production currently runs at 40 units a week and is increasing – it has doubled in the last 18 months.

In considering outsourcing, some serious thought has to be given to manufacturing offshore. This temptation can be understood – potential low price being top of the list.  But in terms of value for money and total costs, with a UK manufacturer there are no hidden costs, no unwarranted expenses and no time delays, language barriers, quality or currency concerns. Advanced payments, relatively high minimum orders, complex shipping arrangements and extended travel for engineering, design and other staff are also eliminated, resulting in more flexibility, lower costs, speedier time to market – and good ROI.

Of course, there are other factors when choosing an outsourcing partner – experience in the chosen field, contacts for procuring a wide range of components, precise manufacturing procedures and proven resources to build and thoroughly test quality products that are highly reliable, delivered on time and cost competitive.

But at the end of the day, what matters and what is likely to provide the best ROI?  The headache of producing in house or the ‘turn it on when you want to’ (within reason) of outsourcing?  It needn’t be a hard choice.

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