Issue link: https://iconnect007.uberflip.com/i/622045
60 SMT Magazine • January 2016 tional test will verify that the board or product is shippable. To do an in-circuit test on every board to find the one out of 200 that isn't built right doesn't pay back. If you can get the yields up, you're able to eliminate that whole process step, i.e., eliminate In-circuit test. Most people do ICT because they don't have the confidence in their process to result in the high yields that we need. All these things, again, point to reduc- ing labor content as a strategy for competing against low labor rate markets. That's what the paper focuses on: two very specific things asso- ciated with automation that allows you to suc- cessfully compete in electronic product assem- bly in a high labor rate market. Goldman: nice. After the paper, what's your next step? Borkes: Right now, we publish a quarterly news- letter which provides a progress report on the development of the school. I'm focused on the school, because without employees with the skill sets to do what we've talked about, buying the expensive state of the art equipment really doesn't get you very far. We've seen that. They have the same equipment in low labor rate markets like those that exist in the Pacific Rim, the difference is they can afford to have very low yields because every assembled board can go into a room with 200 people with soldering irons. Goldman: to fix things. Borkes: Yeah, we can't do that here. That strat- egy won't work. All of our efforts are really focused on trying to create an environment where we can reduce labor content to a very small amount and a very small piece of the cost pie. To give you an example, loaded labor in the United States that's through overhead, G&A, and profit, sells for about $32 an hour. Basically, for a product that requires one hour of labor, I will quote you a price to assembly the product of $32.00 + material costs. Labor in low labor rate areas like the Pacific Rim is more like $6 to $9 an hour. It's a big advantage. The point is if you can reduce your labor content you're mul- tiplying that $32 by a relatively small amount of labor hours. Goldman: Yes, and so it evens out. Borkes: That's the key, but the last part of the labor piece of this is recognizing that the per- son on the assembly floor who is operating the equipment or expending the direct labor doesn't earn $32 an hour. They may get $12 or $13 an hour, which I've done the research on. That's about the average hourly pay for a person that does assembly work in a high labor rate manufacturing environment. Why do we charge $32 an hour for someone that costs the company $13 and hour? The answer is because we have to pay for all the indirect and overhead hours that load onto that $13 an hour rate. Goldman: Yes, it balloons. Borkes: It balloons the labor rate to $32 an hour or more. The other part of this, and the school will be a great demonstrator of this fact, is that we are suggesting reorganizing the way our com- panies are structured. We've evolved into this company organizational structure that groups employees together by virtue of their common skill sets. We have mechanical engineering de- partments, electrical engineering departments, manufacturing engineering departments, fi- nance departments, procurement departments, etc. All those departments need managers, di- rectors, and all the added costs associated with them. This structure is laden with indirect and overhead costs whose value is questionable. Goldman: All the overhead. Borkes: All the overhead that blows that labor rate up. Automation is one tool to compete with low labor rate areas, but the other challenge is to have a total rethinking about the way our companies are organized. For example, the Jef- ferson Electronic Manufacturing Center, which is the EMS that the school will use as their class- room, only has two groups: project teams and a leadership group. The leadership group consists of people that enable a product team to be suc- cessful. They provide the tools that the project FEATurE inTErViEw THE JEFFErSOn PrOJECT