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32 SMT Magazine • December 2014 a very large part of the price per unit goes into the distribution of the product, from the door of the factory into the hands of the customer. In addition to cost, time to market is a key fac- tor to consider, because products with the lat- est technology, many of which are being pur- chased like fashion items, command the high- est opportunity for profit margin, but only for short times. The contribution of cost from dis- tribution, including depreciation in the value of products through the long distribution process, has reached the tipping point as compared to base manufacturing costs, assuming company overhead, sales, and marketing costs remain the same. This is the trigger for the need to look at the next step in manufacturing evolution. As air- freight costs are only going in one direction, and shipping by land or sea simply takes too long, it points us toward the old fundamental principle of "manufacturer close to the mar- ket"—reinvented. It Was Acceptable in the '90s In the 1990s, when many companies were considering the movement of serious amounts of manufacturing offshore to lower labor cost countries, many cost factors were considered but not all of them were considered seriously. The cost of transportation was raised, but was offset by the economy of scale associated with the size and volume of cargo ships coming out of places such as China, as well as the fact that products had to be shipped to various places in the world anyway. The cost of additional ware- housing stages was also dismissed as insignifi- cant. Assessment of risk found no significant change either because manufacturing was al- ready dependent on raw materials coming from remote locations, so with a little due diligence and sufficient insurance, this issue also left the table. The cost to create manufacturing facilities offshore was then offset by the rapid growth in electronics manufacturing services (EMS) com- panies, who saw this as a massive growth poten- tial, bringing the offshore opportunity to opera- tions of all sizes. This seemed to be the end of the story, but recently however, two critical is- sues have emerged as being far more dominant than were once thought. The True costs of Offshore manufacturing SMT chip-based technologies continue to evolve, providing new functionality and faster services in smaller packages, and more power- friendly devices. All of these cause excitement in the market, triggering demand. The Apple iPhone 6 launch broke records for pre-orders on the first day, before anyone had even seen the phone itself, double the number previously for the iPhone 5. These sales are mostly for replace- ment devices, driven by the latest technology which has become fashionable, something that people like to show off. Product availability is expected to meet the huge initial demand from customers. With the threat of rival products coming into the mar- ket from competitors, being just a few days or weeks earlier or later can have a huge effect on the period of profitability of a product. The time to market is therefore an extremely important issue. Design systems for electronic products have come a long way in recent years to ensure that modular design elements can be tweaked and re-used so that each new technology can be integrated far more rapidly into a new product. The market-leading PCB layout tools today of- fer the opportunity for layout designers to work concurrently on a design, reducing lead-time significantly. Material selection and manufac- turing constraints are accounted for during the layout process in a way that is seamless to the layout designer. The completed PCB design is ready for fabrication and then on to assembly with a hugely reduced risk of re-spins and de- lays. The focus in the new product introduc- tion (NPI) process now shifts to the factory and product distribution. Products are traditionally dispatched from the factory into a series of distribution hubs and warehouses, until they end up in the storeroom of a local shop, whether commercial or retail, or as a key sub-assembly going into another product. This distribution chain has a critical effect on the time to market. Before sales of a new product can start, stock has to be built up throughout the whole distribution chain so as to ensure smooth supply and delivery to the point of sale ready for product launch, which takes time and investment. If the product is un- available to a customer, a good salesman will THE ESSEnTiAl pionEEr'S SurvivAl guiDE THe FUTUre OF SmT: WeLcOme TO THe 4 TH dImeNSION continues