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SMT electronics assembly manufacturing forum.


Outsourcing costs

Grant

#33513

Outsourcing costs | 4 April, 2005

Hi,

I have always wondered how contract SMT assemblers work out the cost to build products. Do they calculate machine time, or cost per placement etc?

Regards,

Grant

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cmiller

#33560

Outsourcing costs | 5 April, 2005

Every company does things different. Some use machine time, some per placement, some per placement by part type. It would depend on how the company is set up and how they allocate overhead and what problems they do or dont have with particular part types. There is no wrong way to do it, as long as you are making the margin you think you are. The only real mystery is how you can quote something then find out the company you quoted is buying it for 10% less then after your sales dept reivews the quote the labor or machine time drops by enough to get the business and still have the same profit margin.

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Grant

#33562

Outsourcing costs | 5 April, 2005

Hi,

I guess it matters a lot how fast you can change over the machines, then it becomes more cost per placement I guess. I have heard oursourcing companies purchase most of the parts, and I guess there is a lot of money to be made on that.

Regards,

Grant

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#33563

Outsourcing costs | 6 April, 2005

Hi,

Well said Grant! I guess this margin on the component procurement is the largest contributor in the overall margin for big EMS companies who have global component sourcing and hence very competitive pricing for the same! As regards conversion cost, I guess the methodology becomes entirely different for LVHM and HVLM (Low Volume high mix and high volume low mix). In the former case, the changeover time may be higher than the assembly time, whereas in the latter the assembly time is the major time! So you need to formulate differently.

In case of HVLM, there are numerous tools (mostly in Excel) available to calculate your cost per placement. I made a tool which even includes changeover times, maintenance times, etc... and can be used for LVHM as well as HVLM (of course it's never going to be 100% accurate).

Regards Vinit

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Rob

#33564

Outsourcing costs | 6 April, 2005

We have a very expensive MRP system that can (allegedly) do this, so naturally we also use an excel spreadsheet, which includes feeder loading times, 1st off inspection, printer set up, overhead recovery, machine time etc.

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