Sharing the Data: Why Contract Manufacturers Feel the Pain

Sharing the Data: Why Contract Manufacturers Feel the Pain



It’s a daunting challenge for a Contract Manufacturer (CM) to aggregate and report data to a customer.  Typically, they have to use manual labor to take the appropriate data, parse it into their system, and manually crunch the data (using Excel sheets or similar tools) to generate the report.  The man-hours necessary from technicians, management and analysts can quickly add up and the labor costs can eat into the profitability of the contract.

In the next few years, the ability to provide on-demand test data for review and analysis will provide contract manufacturers with a more compelling partnership proposal, especially in comparison to other CMs which don’t offer their customers with visible, clear test data.  Those that do offer data and teamwork to the customers will have the upper hand in proving the quality and efficiency of their labor, equipment and processes to prospective and current partners.  To all our CM managers: how much nonproductive time do you spend aggregating data for your OEMs?

Scorecarding Contract Manufacturers: Preventing Chargebacks Before They Happen

Trust But Verify

OEMs which work with contract manufacturers have to follow the old adage: trust but verify.  We all carefully vet and work with prospective partners so we can know that we’re working with entities whom we can trust to perform to our expectations. In the case of the OEM and CM relationship a major piece of this trust  is visibility and transparency on manufactured product quality.

However, it’s difficult for some OEMs to gain comprehensive insight into the manufacturing processes of their partners and dig into critical details such as SPC, Yield Failures, etc.  Even the contract manufacturer might not have the capability to fully calculate the impact of quality on their own operations.

One method to handle this is through “Supplier Chargebacks”. This is a punitive process, which  are monetary penalties charged by OEM Manufacturers back to Contract Manufacturers for  non-conforming material or products.  The charges can include  not only the costs for the low-quality product, but also for:

  • Eventual disassembly of the part
  • Quality department handling
  • Handling by the planner to get a new part
  • Communications with the supplier – what shall be done with the part?
  • Attention from engineers

Standard best practices from OEM’s now incorporate these metrics into a “scorecard” format which are given to the Contract Manufacturers as part of their Continuous Improvement initiatives in the supply chain.

A critical overriding metric in these scorecards are concepts such as “PPM (Parts Per Million) or “DPU (Defects Per Unit)”.   This is a threshold number which the OEM sets on incoming defective  units into their facilities. For example a score of  50PPM would mean that the CM would have to provide less than 50  units which have failed out of 1 million.

A more proactive versus punitive method of handling such PPM or scorecard processes, would be to have the CM understand the quality of their product before shipping even begins. Such methodologies as SPC or RealTime SPC would give the CM that edge to win on the metric.  A collaborative process such as this could well save both the OEM  AND CM money, time and resources.

How Contract Manufacturers Can Manage Counterfeit Components

The definition of a counterfeit electronic part is one which has had its deliberately misrepresented by the supplier. ‘Identity’ includes such things as manufacturer, cage code, part number, date and lot code, reliability level, testing, inspection etc.

One surprising statistic that was thrown around is that up to 40% of electronic components going into manufacturing OEMs like Apple can be counterfeit.   Depending upon how the components are screened, this can lead to defective, out-of-specification or completely not working end products (ie…an Ipod).  The impact of this can be large, not only from the loss of money from purchasing the counterfeit parts but also downstream from the manufacturing cost, to the testing cost to the eventual rework and discovery of the issue.

Bill Cardoso (Creative Electron Inc), who spoke at the May 2011 Del Mar Electronicstradeshow seminar “Counterfeit Electronic Components Workshop” talked about how some 3rd party companies help OEMs catch such counterfeits through techniques such as x-ray, visual inspection, Encapsulation and Electronic Testing. Unfortunately in some cases, the counterfeit can be subtle in that resistor/capacitor/inductor values or even older generation (but functionally the same) IC parts have been misrepresented in order to get them out of someone’s inventory and sold to an OEM.   In this case, the functionality of the end product may still be there but the performance may have been degraded due to these subtle value differences.

In the case of aerospace, space or medical applications which need very tight performances on critical parameters, another methodology to catch possible counterfeit components is to monitor measurement trends.  The chart below shows a measurement trend (y axis=RF power, X axis=date range of serials tested). As you can see on 8/09 something happened with the measurement which shows that perhaps some component value had changed. Was this a counterfeit component that caused this variation or was it normal?  By looking at trend charts like this, at least the investigation can start.

Electronics Makers Serving Up Half-Baked Gadgets?

Keep an eye on quality

There’s an interesting article (link courtesy of CNN) the other week about the rash of consumer electronics that are being shipped to end customers with minor (and at times major) deficiencies in functionality.  An important quote from the article reads “Often, companies launching complex hardware-and-software packages are forced to make compromises in order to meet deadlines,’ said Harry Wang, a mobile analyst for market research firm Parks Associates.”

It’s crucial for test data engineers to keep this development in context: if businesses find a quantifiable value in rushing production schedules before a product is fully polished, then it’s important to maintain a steady grasp on your component quality trends before they ship for final assembly.  If you aren’t paying attention to your SPC and quality data as the components are being manufactured, there won’t be any second chances or cushion time before the product is in the hands of the consumer-and, unfortunately, test data engineers will inevitably have to shoulder much of the difficult and time-consuming recall and warranty return processes triggered by such an inflexible timetable.

Firefighting Quality Problems at Contract Manufacturing sites


Inevitably as trust builds over time between  OEMs and contract manufacturers, there are  and can be specific times when it can be  strained. A particular problem may come up in  New Product Introduction (NPI) or during  steady state production which involves some  heavy conversations on both sides to resolve  the problem.

These problems become serious “firefighting” situations when time-to-market is delayed or shipments are being held up to important customers. Critical problems like low yield and critical quality defects are the main culprits in these firefights.

The process for most companies caught up in this whirlwind is to engage R&D, Manufacturing, Quality etc people from both sides in Kaizen or committee settings to rapidly root cause the problem. This would take the form of large meetings and frequently key people would be flown to the problem manufacturing sites.

With a typical North American domestic business trip expense of $1000 (source American Express 2009 Annual Global Travel Forecast) and international trip expense of $3400, these trip costs can quickly add up. This does not even include the daily loaded cost of employees for these firefighting sessions which can be on average $1000/day. A typical issue can easily run into the tens of thousands of dollars in costs for an OEM and contract manufacturer to diagnose, fix and verify.

I suggest that increased visibility of key product data such as yields, test runs etc can significantly reduce the cost of this resolution process. Providing access to this information would engage the right persons, at the right time (typically teams are engaged across different time zones) and allow for better collaboration across the sites eliminating travel.

Harsh Wanigaratne, IntraStage