Issue link: https://iconnect007.uberflip.com/i/780804
72 SMT Magazine • February 2017 sense. And, despite their best intentions, we found that our subcontractors would some- times make mistakes that not only cost us lots of money, but also wasted precious and unre- coverable time." Inventory Control and Cash Flow Quicker turnaround times lead to better control of inventory levels and reduced strain on cash flow. Prior to bringing their production in-house, Campbell Company's electronics in- ventory was heavily skewed toward a high per- centage (almost 90%) of completed electronic assemblies that had been outsourced at a cost that included the subcontractors' labor. The re- maining inventory (about 10%) consisted of extend out to 16 weeks." Now that he has the capability in house, Tate can turn those same boards around in one to two weeks. "I can have Gerber drawings in a day or two, and bare PCBs in about three days," he says. "I generally try to avoid having to do that but, in an emergency, a few weeks is all we need to flip a board." For Wagner, the year and a half he spent us- ing subcontract assembly services for Sensor- con's product was all the time it took for him to know that it was neither economical nor feasi- ble. "New product development is such an im- portant part of our long-term business strate- gy that subcontracting our prototype assem- bly, and even our initial production runs, just slowed us down to a point that it made little BRINGING SMT ASSEMBLY IN-HOUSE 65% 10% Raw Materials Assembled Boards 90% 35% Supply Capacity Off-the-Shelf + Manufacturable Product In-House Labor Cost Subcontractor Labor Charges BEFORE AFTER Reduction in Inventory Cost 35-40% Figure 3: Campbell Company's electronics inventory before and after bringing their SMT assembly in-house. The blue areas, which represent inventory cost, are enclosed by a yellow area representing total supply capacity (off-the-shelf + manufacturable product). For equivalent levels of supply capaci- ty, the ratio of assembled boards to raw materials went from 90/10 before to 35/65 after, resulting in a 35–40% reduction in the total cost of their electronics inventory. Also of note is that subcontracted boards in inventory tied up a significant amount of cash that paid for the subcontractors' labor and overhead. The ability to produce smaller batches more quickly in-house (and presumably at lower cost) significantly reduces the burden on cash flow.