At 08:35 PM 9/2/2003, Brad Velander wrote:
Why your company does? Couldn't tell you but I know why most companies don't.
Because to a bean counter there is a real and tangible cost to keeping your own assembly facility. To production there is a very real but less tangible savings to keeping your own assembly facility. A bean counter can't put an easy figure on problems, headaches, missed project dates, etc.. So typically the simple solution from the bean counters view point is to outsource. From production and engineering's viewpoint, they can put all the figures they want to those less tangible problems but the bean counters just scoff and won't accept them. A dollar in the bean counters hand today is better than two dollars tomorrow.

Wait a minute. "Bean counter" means, in what Mr. Velander wrote, "the profit motive." As I understand what is being said, allegedly there are difficult-to-quantify benefits to having one's in-house assembly facility. Similar arguments might apply to in-house panel silk-screening, in-house printed circuit board manufacture, how about in-house integrated circuit fab?


Obviously, sometimes the overhead associated with doing it yourself is simply too high. And in-house facilities certainly can include a lot of otherwise avoidable "problems, headaches, missed project dates," etc.

When an ouside supplier of common goods or services can't meet a required deadline because of lack of capacity or for whatever reason, you can usually find another supplier. When your own in-house facility can't do it, you can always go outside, but if you have an in-house facility, the "bean counters" might not be happy about spending money outside *plus* maintaining an inside facility.

If your company has enough work to keep a moderate sized assembly operation busy most of the time, it can make sense to do most assembly in-house. But if you set up enough capacity to be able to handle peak loads, you'll have idle equipment and staff most of the time. To solve this, you might take in outside assembly, but then you are running a commercial assembly operation, and I'm sure that any assembler will tell you it's a tough, highly competitive business.

Before I became a printed circuit designer, I was a printer. Yes, ink on paper. I got into that because I went to work, as an editor, for a publisher. The publisher got the bright idea that he could save money by setting up his own printing plant. His wife had a lot of money, so the capital was not a problem. A half-million dollars later, he had a few books published and a printing plant to run. He could have had the books published for less than a tenth of what he put into it, and I won't even mention the headaches involved in running a printing business. Eventually his wife got tired of pouring cash into the business and it was all shut down and sold off. At a big loss.

As I said, *if* you have enough work to keep an assembly facility running most of the time, it might make sense to do it inside. Otherwise, generally, no.

The argument that if the plant is inside, one can give priority to one's own work ignores the fact that rush work can be done outside as well, ordinarily it's enough to toss a few more bundles of cash toward the assemblers. It's unlikely that everyone in the business is fully booked!

Similar arguments can apply to in-house printed circuit design. Design load tends to vary greatly in small to medium sized companies. If you maintain enough staff to do all the work inside, you'll have idle staff much of the time. Expensive. My own general suggestion is to qualify a good outside designer or design service; a small company might even do all design outside, certainly I know many which do. As the company gets large enough to keep a designer occupied full-time, then one can be brought on board. Still, as the design load will typically vary wildly, there will then be times when that designer has too much work, so you'll still use an outside service.

There are some engineers who believe that it is necessary to have the designer and engineer face-to-face in order to get quality work. It's an expensive belief: I've travelled at client expense to attend design reviews, and I'd say that most of the time was wasted. Very little was accomplished that could not have been accomplished with phone, fax, e-mail. Sometimes *less* is accomplished, really. Using fax and e-mail, in particular, leaves a record. Face-to-face meetings often don't.

Well, I wandered a bit, didn't I? Let's just say that I've seen a lot of money wasted on in-house production when outside services could have done as good or better a job at lower cost. If you *are* going to have in-house work going on, be sure that the true cost is accounted for, costs such as increase of overhead, capitalization of equipment. Sure, there can be headaches dealing with outside vendors. But with care in choosing vendors, those headaches will generally be less than the headaches of running what amounts to your own specialized business which may be outside your special expertise.

Like my first client as a printed circuit designer, almost thirty years ago. He was a can-do engineer type, had a design company making control equipment for, among other things, those monster trucks used at the copper mines. Had his own milling machine to make cases, etc. Had his own *camera* to make film for producing PCBs, which, of course, he etched himself. Of course he had a solder pot, etc., and it goes without saying that he did his own assembly. Why didn't he do his own printed circuit design? Well, besides designing and selling his electronic products, he was too busy running his machine shop, camera, making printed circuit boards. And later, supervising a few employees. Let's put it this way: he was a brilliant engineer. Too bad he didn't focus on doing engineering instead of providing services for himself that he could have purchased outside cheaply. And, in fact, with better quality. That company had some large contracts, but they weren't enough to keep it afloat.



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