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74 SMT Magazine • February 2017 Per Tate, there's no comparison between in-house production and subcontract assem- bly services when it comes to quality control. While subcontract assemblers may be extreme- ly knowledgeable in SMT equipment, process- es, and best-practice quality procedures, they're not intimately familiar with the nuances of any given product's design. This makes it much less likely that they will detect problems as quick- ly or as easily as the developer of the prod- uct. "Now, when we encounter problems, we can identify the root causes almost immediate- ly and take whatever corrective action is nec- essary," said Tate. "Troubleshooting is always much more difficult in a subcontracting situa- tion. Our products also require a lot of in-pro- cess testing at various stages of assembly and it's nice to be able to monitor that activity very closely, especially today, as important as SPC re- porting and traceability have become." Calculating Actual Cost Thus far, all the aforementioned advantages of in-house SMT assembly (shorter lead times, reduced inventory, improved cash flow, and better product quality) provide significant cost savings and commercial benefits. Because re- turn-on-investment and payback calculations all take generated savings into account, these factors must be included. But let's put these fac- tors aside for a moment and look strictly at cost. How does one go about establishing the actual cost of building one's own boards? How long of a payback period is to be expected for the pur- chase of the necessary equipment? The cost categories associated with manu- facturing a product can be broken down into direct materials cost, direct labor cost, and manufacturing overhead, which, among many other things, includes the cost of the equip- ment depreciated over time, utilities, mainte- nance, and training, to name a few. Overhead also includes a variety of other indirect product costs of greater and lesser significance, further complicating the calculation. As a result, one company may estimate its manufacturing costs quite differently from another. While the services of an EMS subcontrac- tor would seem to make it much easier to con- trol and quantify the direct labor cost of a PCB assembly (cost of completed assembly less raw materials cost), without having to be concerned with manufacturing overhead, there are other indirect costs incurred when using these servic- es. The amount of time and effort that goes into coordinating production and delivery schedules with a subcontract assembler can be significant. Costs for bare PCBs, components, and complet- ed assemblies are a function of order quantities and, as mentioned above, balancing inventory levels for each of these, based on sales forecasts and actual product demand, can be extremely challenging. "When we were first starting out, some of our vendors supplied turnkey product," said Wagner, meaning that the subcontractor sup- plied the boards, components, production, and anything else needed to deliver a complete PCB assembly. "Of course, you pay a premium for that, so as a next step toward reducing costs, we tried a pre-kitting service offered by one of our component suppliers. Despite some initial savings," Wagner explained, "an excess of raw materials seemed to accumulate after each job, telling us this system was inefficient and wast- ing money. Typically, the problems centered around tape-and-reel component packaging and minimum order quantities, so we finally BRINGING SMT ASSEMBLY IN-HOUSE Figure 5: With the addition of their second Manncorp SMT line, Sensorcon's 3000 CPH MC-400 pick and place will now be used for new product development. Its feeders are interchangeable with their new MC-385.