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80 SMT Magazine • July 2017 Last month we began a discussion on the cost of material associated with electronic prod- uct assembly. It was recognized that any increase in ma- terial cost based solely on an assembly opera- tion's geographic location could cause a condi- tion that would not allow a turnkey electronic product assembler to successfully compete on the global landscape. Previous research has uncovered the fact that material price variation of this kind does exist. The disparity cannot be explained by shipping costs or differences in the overhead costs of a particular component manufacturer or distrib- uter's location. 1 Considering that material is typically 70– 90% of the total recurring production cost of a product, even small disparities in material cost as a function of geographic location can bury the effect of labor rate differences. Regardless, it is differences in labor rates that seem to get all the press attention. So, let's drill down into material cost and try to understand all the variables involved, both those that can be controlled and those that can- not. Before putting the drill in the chuck, how- ever, a definition of terms will be needed to maintain our sanity. Specifical- ly, how we have historically used the terms manufactur- ing, production and assem- bly, as they apply to elec- tronic products has vexed me for about 30 years. It is the inconsistency in use that has been a source of confusion and annoy- ance. Here is how I have proposed to use these three terms: Production: An overall collection of processes used in creat- ing a product that can be sold to an end user. It includes components of manufacturing and as- sembly. Manufacturing: A process or series of processes that use material fabrication techniques to create a large- ly inseparable part or compo- nent. It is an irreversible pro- cess. For electronic products, by Tom Borkes THE JEFFERSON PROJECT Analyzing the Cost of Material in Today's Global Economy, Part 2 JUMPING OFF THE BANDWAGON

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