Checking the options: Asian Manufacture

The design and manufacturing launch of an electronic product involves many man years of effort, a process which can be dauntingly expensive to some, especially with one off bespoke designs. Traditionally, the alternative has been to use an original design manufacturer (ODM). While offering significant cost savings, this approach is not without risk and only really works for 'me too' products. But is there a middle ground, which would enable product developers to achieve significant cost savings and retain control? The answer is 'yes', but it requires a structured approach and a high degree of trust. Cambridge Consultants' experience in developing electronic products, combined with its ODM connections in Asia, brings an interesting perspective to this; experience which has enabled it to develop a model for low cost product development. This model is particularly applicable to consumer electronics, where the product lifetime is short and cost control is paramount. ODMs that serve the consumer electronics industry typically offer mechanical, electronics and software design capabilities, but tend to focus on particular types of product. Generally, they will have an existing design portfolio, which may be used to expedite new product development, provided the platform matches the specification's key requirements. In this instance, an ODM will generally give the client the rights to use the platform in return for a modest licence fee, on the assumption that they will make their money from the subsequent manufacturing contract. However, the ODM will usually charge for non recurring engineering costs and/or any tooling costs incurred. The ethos of the model is that your company or your design agency remains the design authority, with responsibility for the detailed design of the product's critical aspects (including user interfaces, innovative electronics and software solutions). This is important when a completely new design is required. As a general rule, the ODM would be responsible for the more routine, less value added aspects of the design, where a low cost design and development is appropriate (for example, pcb layouts and tooling), and for product validation testing and legislative certifications. A typical ODM sourcing project of this nature can be divided into five phases. * Search The first task in an ODM search programme is to explore the available options. Part of this process will be to ensure the focus of subsequent research is geographically appropriate and targets the most suitable types of organisation. Factors to consider at this stage include: the technical complexity of the product design; the likely costs of supporting the ODM through the design process; likely bill of material costs; supply chain requirements; the technical complexity of the manufacturing processes; import/export restrictions on raw materials and finished goods; and transportation costs of raw materials and finished goods. The preliminary search, which takes up to six weeks to complete, will usually be conducted using a briefing document derived from the client's requirements specification. Ideally, it should identify the key 'must have' requirements versus the 'nice to have' requirements. This research brings a 'long list' of potential suppliers, which can be filtered. The 'filtered long list' is submitted to the client, along with a report containing the design agent's recommendations for the next stage in the selection and engagement process. * Qualification The primary focus here is to consolidate the product specification with the capabilities and/or platforms on offer from the 'long listed' ODMs. Phase two includes: refinement of the product requirements specification with the client; face to face meetings with ODMs to assess their technical suitability; and audit visits to the ODMs' design offices and manufacturing facilities. This generally takes up to 12 weeks. Ideally, the client will be involved at this stage and should be encouraged to start building a business relationship that will last after the agency's work is complete. The result of this phase is a report of the meetings and an assessment of each ODM's technical, design and manufacturing capability, and of their relevant product portfolio. Based on these criteria, a 'shortlist' of two or three ODMs capable of supplying the services or platform that meet the requirements can be drawn up. * Final selection and engagement While Phase 2 will have a significant bearing on the final selection, it is by no means conclusive. Having narrowed the options to a manageable choice, the ODMs should be engaged in initial contractual discussions and a final RFQ exercise so as to obtain more accurate cost estimates. It is important at this stage to consider each ODM's capability in detail, including the maturity and robustness of their design processes, the capability and quality of their manufacturing processes, and contractual terms. Optionally, the agency might conduct due diligence on the financial stability and/or a target pricing study. Once a development contract is in place between client and ODM, the product development project can commence. * Execution of product design This is the most significant phase in the overall project. The development process will be led by the project manager in much the same way as a product development that was entirely 'in house'. The only significant difference would be that project review and milestone meetings would be three way affairs, attended by the project leaders, the client and representatives from the ODM project team. In addition, whilst a proof of principle prototype would still be built by the designer, engineering prototypes would generally be built by the ODM. * New product introduction Typically, this phase takes up to 18 months and is centred on a number of product validation builds followed, if necessary, by Pilot Build. Broadly speaking, an engineering verification build confirms the design is technically correct; a design validation build confirms the design meets the client's user and functional requirements specifications; and a manufacturing validation build confirms the manufacturing process is capable of delivering the required yield, quality and capacity. Activities to be undertaken in this phase include: manufacturing and test process development; review and improvement of the ODM's process capability; optimisation of cycle time (throughput and line balancing) and first time yield; and review of the line control system and traceability management procedures. It is also important to assess the suitability of the ODM's quality reporting procedures, engineering change management procedures and procurement strategy. Where necessary, modifications can be made to meet client requirements. Conclusions ODM sourcing can reduce the cost (and often the duration) of a new product development significantly, but choose your ODM and your development partner carefully, as a successful project is contingent on finding the right partners for the product. However, remember to use the model appropriately for product designs that are technically demanding or which require complex manufacturing processes, otherwise the cost of supporting a geographically remote ODM can negate the potential design cost savings. Author profile: Derek Wallis is programme director, products and systems, with Cambridge Consultants.