To build, or to buy? That is the question

ESNA June15 Pg24 & 25 Electro 1The ability to keep up with demand in the most cost-effective way dictates whether to outsource electro-mechanical subassemblies, explains contract manufacturer, Electro-Prep.

Given the world’s insatiable appetite for ‘smart’ products, today’s OEMs must increasingly incorporate electro-mechanical subassemblies into a product. Yet, building these boxes full of circuit cards, custom cables or wiring harnesses and electro-mechanical elements like relays and servos, can strain the capability and resources of manufacturers that previously produced mainly mechanical products.

At such point, the manufacturer faces a critical ‘build or buy’ decision. Do you deviate from your core competency and try to build the electronic assembly yourself, or is it wiser to outsource the work? This is particularly crucial when the electronic components may only represent a small part of a larger product.

Outsourcing up

At present, the scales seem to be tipping in favor of outsourcing. The projected size of the global market for electronics contract manufacturing is expected to leap 54 per cent from 2013 levels to $670 billion by 2018, according to, a web portal that draws from more than 18,000 sources.

Such figures underscore the trend towards outsourcing subassemblies and the electronics and wiring within. Even some contract electronics manufacturers have found it more expedient and cost-effective to outsource some of their work to box-build specialists, rather than shoulder that extra work in-house.

J&J Technologies, for example is an ISO certified provider of turn-key and consignment electronic manufacturing services specializing in quick-turn prototype to medium volume surface-mount and through-hole assemblies. J&J president, Jim Ayars, said: “We have cable equipment here and can do all of the box building ourselves, but for some production runs it doesn’t make sense to invest in the people, expertise or equipment for a particular cable when we know we can get a fair price and good turnaround with a trusted subassembly partner. In this manner we can pass on our savings to our customers.”

DIY down

Manufactures still lay claim to the creation and design of their products. They typically handle final assembly, along with most aspects of the systems engineering process, but when drilling down to the details of electrical and electronic subassemblies, and wiring it all together, many manufactures can no longer justify shouldering the entire process in-house.

This can be the case even for OEMs that begin making their own electro-mechanical assemblies, but discover they cannot scale up quickly enough to keep up with production demands at higher volumes.

Given the obstacles of making every part themselves, many OEMs simply purchase the necessary subassemblies with the circuit cards and mechanical devices already inserted and wired together according to their specifications.

Wareham, MA-based Electro-Prep is a turn-key and consignment contract manufacturer of wire harnesses, cable assemblies, electro-mechanical assemblies and box-builds. Driving the appeal of outsourcing is the fact that companies like Electro-Prep specialize. Specifically, Electro-Prep can connect coax, ribbon cable, multi conductor cable and mechanical components, a process which is said to be hard to duplicate cost effectively.

Jim Ayars points out: “Every part you build up has specific tooling, so it’s a larger investment each time you want to do something new. There’s a big benefit in utilizing someone that already has that equipment, so you can keep non-recurring costs to a minimum.

“Some manufacturers invest in advanced assembly technology, but this equipment is expensive and needs a certain level of volume to be sensible. At some point up the supply chain you have to stop and take advantage of what a specialized box builder does more economically and faster, and work out a partnership.”

Speedy solutions

When ‘time to market’ ranks higher than ‘cost to produce,’ the decision to outsource subassemblies makes even more sense. The rush to market a new product often precludes the time required to acquire the talent and infrastructure to match what subassembly contractors can do on short notice.

Jim explained: “In one instance, Electro-Prep already had the competency for a particular piece of work we needed quickly, and they could produce it in parallel with our work, so we could integrate the build for a faster response for our customer.”

Further fueling the acceptance of using subassemblers is the high level of quality from US companies such as Electro-Prep. Process certifications such as ISO 9001, along with training standards like IPC/WHMA-A-620 for assembly and J-STD-001 certification for soldering help ensure reliability. Underwriters Laboratories (UL) and Canadian Standards Association (CSA) listings, along with restriction of hazardous substances (RoHS) capabilities, help reduce liability for the parent company. Working with onshore suppliers also enables rapid resolution of any issues.

Even for large contract manufacturers, the argument for buying built-to-spec boxes from subassembly houses is compelling. The profit margin is simply too low for them to do it themselves. They, like so many OEMs, prefer to contract with a subassembly provider who can help them grow.

Ayars concluded: “It doesn’t matter if the box builder is large or small, the ability to meet target production dates is most important. If they have an expertise in wiring up cables that we don’t have, I’ll opt for that route every time.”