Issue link: https://iconnect007.uberflip.com/i/1288481
52 PCB007 MAGAZINE I SEPTEMBER 2020 Are we buying from suppliers that can pro- duce in large quantities and achieve economies of scale, giving us lower prices? Or are we buy- ing from suppliers that are pretty low-volume suppliers, where pric- es might be a little bit higher? Are we actively working with our sup- pliers to find ways to reduce cost and improve quality, or are we just buying stuff from a cata- log?" That contributes to cost as well. Supply chain management was getting a lot of attention even before the current pandemic because it creates a huge opportunity to im- pact both the cost and quality of our products. It also impacts performance. Companies that identify good suppliers improve the perfor- mance of their products because their suppli- ers may have access to technology or technical capabilities that the company is unaware of. Your supplier can enable you to achieve higher performance. It's not just about cost or quality; it's also about achieving higher levels of per- formance, and I encourage companies to take a hard look at their current suppliers and ask whether these suppliers will help them achieve their quality, cost, and performance goals. Johnson: Let's walk through this systematical- ly. You started with cost savings. Your suppliers are providing outsourcing for some of your pro- cesses. When you were at HP, much was man- ufactured in-house, and we have absolutely shifted away from that. One of the motivations for that shift was cost savings. If you can use a supplier on a project-based, as-needed basis rather than having a sunk cost, there should be cost savings, but does that still hold true? Rodgers: It depends on the specific thing you're buying. There are a lot of companies that have brought production of certain critical compo- nents in-house, and there are a couple of rea- sons for it. If you really feel that the source of your competitive advantage as a hardware producer—assuming that you have a hardware product of some kind—is some specific tech- nical capability, the only way you can really maintain that competitive advantage is to pro- duce that component or subsystem internally. In other words, if you're buying the same com- ponent or commodity that everybody else is buying, how is that going to help you achieve a competitive advantage? That makes sense for things like resistors and capacitors. These are basically commod- ity components. But if your product depends on the performance of a custom ASIC of some kind, then maybe the right thing for you to do is to produce that ASIC in-house as much as possible. You may use a fab of some kind to produce the ASIC, but the in-house design pro- vides you with a competitive advantage. I en- courage companies to look at everything they buy and consider whether those components really contribute to their competitive advan- tage as a hardware producer. Does it help your product compete more effectively, or is that not a source of competitive advantage? If not, then you're better off buying from a low-cost supplier because, in most cases, that will save you money. Keep in mind that anything you produce in- house will probably be in lower volumes. You'll have a lot of capital equipment, expenses, and investments to support that internal produc- tion, which means your pricing will be higher. Now, you may be willing to pay more money to produce this in-house because it gives you a competitive advantage. That's a discussion that I'd like to see design, R&D, and new prod- uct development teams have with their pro- curement organizations. What commodities can we buy on the open market to save money, and what commodities or components should we be producing in-house? Johnson: That's a great perspective for OEMs and assembly houses. Let's talk specifically about PCB fabrication; where is the trade-off there? Rodgers: I've been a little bit out of the printed circuit manufacturing game for a while, so I Tim Rogers