Action Plan for PCB Fabricators in North America and Europe

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1 WHITE PAPER Action Plan for PCB Fabricators in North America and Europe Printed Circuit Board Manufacturing Consona Corporation June 2008

2 EXECUTIVE SUMMARY There s no question that the printed circuit board (PCB) manufacturing market has changed dramatically in recent years. Whereas 30 percent of the world s production of boards of all types took place in Europe and North America in 2002, by 2007 that market share had declined to 17 percent with the majority of production now coming from China and Japan and with Taiwan, Korea and the rest of Asia increasing production year-over-year. This situation is by no means unique the migration of manufacturing from industrialized countries to emerging and lower-wage areas of the world is a well-documented pattern that has been observed in everything from consumer electronics to clothing and shoes to automobiles and construction equipment. In circuit boards, it has played out in this way: At first, the low cost suppliers focused on the less demanding business rigid, high-volume, simple circuits that did not require a lot of technology or engineering. After dominating those markets and gaining experience and expertise, these suppliers have moved up to more complex circuits, with more layers, and a more complex stack-up with tighter tolerances. This trend will surely continue. As traditional markets migrate to these low-cost suppliers, what can a PCB manufacturer in Europe or North America do to compete? turn around business. Staying ahead of the capabilities of these evolving competitors is critical, in terms of engineering and other value-added services that cannot be easily duplicated and are difficult to deliver from another continent. In terms of production, it is the ability to manufacture increasingly complex, HDI, controlled impedance, and high layer count boards in relatively small quantities quickly. Taking the lead with new technologies and processes is also an important advantage. Take the evolving trend toward embedded components as only one example. Eventually, low-wage overseas competitors will be able to tackle these technologies as well, but the Western producer should be moving ahead to the next innovation before that happens. $ Billion World PCB Monthly Shipments Constant 2006 Exchange Rates North America Europe Japan South East Asia The answer lies in the particular mix of skills and capabilities that are not easily duplicated by a supplier half-way around the world. In short, the best opportunities lie in high valueadded products and services (highly engineered) and quick Calendar Year THE GOAL Notwithstanding the above concerns and strategies, PCB manufacturers continue to face many of the same basic challenges that have proven to be critical concerns for years: effective sales strategies, cost control (including the everpresent need to increase yield), and customer service (a key component of playing to competitive strengths vis-à-vis offshore competition). Sales efforts must focus on those opportunities where the supplier s strengths provide a reasonable chance of success. It makes little sense to expend a lot of effort chasing business that will likely go to low-cost producers in the Far East. So, understanding the market, and the supplier s own strengths, is critical. Once the prospect base is clearly identified and characterized, the supplier must aggressively pursue opportunities. This means generating numerous quotes, quickly and accurately. Success is all in the numbers; more (viable) quotes lead to more sales. Of course, having the right specifications and requirements and making sure they are passed correctly to the production floor is a critically important part of the process. Therefore, integrated engineering and production systems are essential, given the complexity of today s PCB designs and requirements. 2

3 Suppliers in the same geography should have a built-in advantage in customer service. Free from language, timezone and cultural boundaries, local suppliers should be able to better understand requirements and needs, offer products and services tailored to the needs of local markets, and respond quickly with quotes and production to meet or exceed expectations. Offering an expanded range of products and services, including engineering, local suppliers should endeavor to become partners with key customers, assisting in the design and application of the latest technologies and techniques to produce boards that elevate the functionality and utility of the products. High value-adding suppliers can ensure quality, quick on-time delivery, and fewer errors through engineering services and direct transfer of Gerber files and a high level of automation and quality control in the plant. Future of PCB Fabrication I only foresee a successful future for relatively small players that have a unique technology or substrate niche (e.g., edge plating), provide boards for the military, are involved in quick-turn applications for prototype or preproduction runs (high mix, low volume), or serve smaller local markets or certain customers with whom they are well aligned. There is one other category that is the company that can provide quality boards on time. Gene Weiner CircuiTree Magazine Gene Weiner is president and CEO of Weiner & Associates, Inc. He is a member of IPC s Raymond Pritchard Hall of Fame and was one of the first recipients of IPC s President s Award. In 2000 he was recognized as one of the 10 most influential people in the PCB industry. THE PLAN If knowledge is power, capturing, controlling and exploiting information are the keys to survival in the challenging market for circuit boards. Fortunately, information technology continues to evolve by delivering more capabilities to address the growing needs of manufacturers. The most important characteristics of information systems today are breadth and integration. The suite of software needed to support the quest for quality, responsiveness, cost control and customer service must address the full range of business activities engineering, sales, quoting, production, shipping, quality and accounting/ finance and be fully integrated to provide speed, accuracy and coordination throughout the enterprise and across the supply chain. Many PCB manufacturers today are multi-site and many engage in close partnerships with other suppliers around the world. Comprehensive and well-integrated information systems allow these companies to appear and respond as a single resource for the customer, providing a full range of products and services that appear to the customer to come from one entity. Engineering can be the most time-consuming part of the job, especially when targeting some of the more complex board types. And oftentimes, these jobs are prototypes or firstruns with severe time constraints. Non-integrated systems can add to the problem by requiring redundant data entry and not supporting collaboration and seamless transfer of information between engineering, production, sales, the customer, and quality control. With an integrated system, specifications can be transferred electronically from the customer into the engineering system. After validation and detailed engineering, the information Front-End Automation moves electronically to the quoting system (or the two are, in fact, parts of the same system) to ensure accuracy and completeness of the quote and pricing. After customer sign-off, the data can move directly into the production and quality systems with no re-keying and no risk of keying errors. Late changes, quality measurements, and actual costs are captured and stored along with the complete history of the design and the order. 3

4 Front-End Automation Benefits: Reduce front-end and overall cycle time Improve quote accuracy and margins based on detailed specifications Eliminate redundant data entry, reduce errors, and ensure consistency and accuracy with electronic file transfers (Gerber, ODB++ files, etc.) Capture engineering information and trends as a business asset from an integrated front-end system Reduced errors, omissions and paperwork by eliminating manual data entry Customers for high-tech, complex boards are nearly always in a hurry. They want immediate response when requesting a quote and they expect the final information from product engineering to be complete and accurate. They must be able to apply costing/pricing logic to generate the customer quote and build the engineering and business information that will be used to initiate manufacturing when the contract is awarded. Automated workflows manage the process and supervise distribution and coordination between all participating parties engineering, sales, production, materials/procurement, quality, management, and the prospective customer. Enterprise Resource Planning (ERP) is all about applying company resources most effectively and efficiently to meet customer expectations, minimize costs, and maximize profits. But one-size-fits-all ERP will not deliver these benefits in a PCB plant. Specialized ERP, developed specifically for the PCB industry recognizes the high engineering content, continuous nature of processes, stringent quality requirements, and the need for agility. Production and Management Production and Management Benefits: Automate the transfer of data between engineering and production, reducing re-work and scrap Shrink cycle time, while delivering increasingly complex products Boost yields and efficiencies, while improving cost control and profits Production and Management NEXT STEPS Circuit board manufacturers in the West cannot compete successfully with lower-cost offshore suppliers in the higher volume and simpler board markets. And, increasingly, offshore competitors are moving up-market to more complex boards. Western manufacturers must focus on those areas where they offer unique advantages in high value-added products and services (highly engineered) and short turnaround business. Comprehensive and integrated engineering systems facilitate the quick and accurate capture of customer requirements and specifications, generation of complete, detailed specifications and quotes, and the direct transfer of design and quote information to production, avoiding delays and introduction of errors. The production system picks it up from there to produce high-quality boards exactly as needed by the customer, with tight quality and cost control. By staying ahead of offshore competitors capabilities and by delivering superior customer service, especially quick turnaround, domestic board producers can carve out a healthy, profitable business. Integrated engineering and production systems provide the tools to quickly and accurately respond to customer requests, produce high-quality boards, and deliver quickly and on-time. 4

5 Cimnet Systems A Consona ERP Solution 901 Warrenville Road, Suite 400 Lisle, IL TEL (630) FAX (630) Toll Free (800) Cimnet Systems, a Consona ERP solution, specializes in helping PCB manufacturers around the world establish a sustainable competitive advantage in today s global electronics industry. Based in Lisle, Ill., Cimnet Systems delivers a comprehensive family of industry-specific ERP, engineering automation, sales quotation, manufacturing execution, and supply chain communication solutions, as well as outsourced CAM and sales quotation services. Cimnet Systems is ready to provide the information management solutions and support you need to keep your business lean, productive, and ahead of the competition in today s rapidly changing market environment. Give Cimnet Systems a call today to learn more. Copyright 2008 Consona ERP Inc. All Rights Reserved.

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