To make or buy? We have the answer26th March 2021
When electronics design companies reach a certain size, they often face a choice between expanding in-house production or outsourcing to a contract electronics manufacturer (CEM).
Getting it right
Cambridge University’s Institute for Manufacturing (IfM) says that “Make or buy decisions are often made reactively and purely on the basis of cost,” and that this can be risky. It calls for a structured process to review all relevant factors in an objective manner to reduce making expensive mistakes.
We too have found that companies frequently only look at the cost of materials, overlooking other critical factors such as investment in factory space, machinery and extra staff.
We know how hard it is to ‘hand over’ to someone else, but the benefits of outsourcing are evident: greater efficiency, as a CEM will have the capacity to produce at higher volume; lower labour costs – leaving staff free to focus on designing, selling and marketing products; and lower risk – as tasks like compliance and testing will be handled by the CEM.
For an electronics company, the majority of its expertise will be in design – and the market in which it operates. Its value lies in its skilled staff and the IP that they have helped to generate. The actual manufacturing of the products is a different game – and ramping up the volume is a huge challenge.
A good sub-contractor will enhance a company’s reputation because it is focused on manufacturing alone. It has the specialist staff and machinery, manufacturing capacity, buying power and – crucially – expertise in compliance to ensure that the final product is top class.
Fear of losing valuable intellectual property (IP) is understandable, but by vetting and choosing the right subcontractor who respects non-disclosure agreements, this fear is unfounded. Using a company like Offshore Electronics has an added layer of security because we are based in the highly regulated jurisdiction of Guernsey. We are also a pure contract CEM; we have no products of our own, so we are a dedicated manufacturing partner.
An established CEM will also have economies of scale, and can handle everything including buying individual components, assembly, and both testing and shipping of the final product.
CEMs are usually considered to be for large companies only; but SMEs are often most likely to benefit from the services of a CEM. A small facility making products by hand may not be getting the required repeatability and product quality. It may also be too small to handle ISO accreditations or meet compliance rules.
Regulations are becoming more of a challenge and achieving and maintaining an ISO-approved facility takes a lot of time and money. There is also the question of assuring that the final product is of acceptable quality. CEMs will be have this, as well as working to IPC 610 Class 3 – considered the ‘gold standard’ of electronics assembly.
A good CEM can also help to improve products through its manufacturing expertise. For instance, printed circuit board (PCB) layouts are often over-engineered, expensive and difficult to produce. As an example, here at Offshore Electronics we offer a prototyping service to help designers remove complexity, and redesign a product so it can be made more cost effectively. This process also speeds up manufacturing and improves reliability.
Getting the make or buy decision right is crucial to the future of your business. If you’re at the ‘make or buy’ crossroads we can help you determine what’s the best route for your company. Get in touch. Contact us at firstname.lastname@example.org
Download our Make or Buy Guide for more information.