Although the lure of low-cost labor is tempting, offshoring production of printed circuit boards can lead a company into a host of problems. Firms can find themselves dealing with increased costs, regulatory hurdles and pitfalls relating to quality control. Here are 10 reasons why:
- Intellectual property: It is very difficult to defend IP piracy abroad. U.S. firms lose 1$ for every $3 gained due to stolen IP.
- Counterfeit parts: This is a huge problem worldwide and out of the companies control. Most companies will find out after the parts have been utilized in their product.
- FDA shipment delays: All products having 510(k) approval must not only meet the FDA regulatory standards, but get FDA clearance in Customs and meet the Bureau of Customs & Border Protection standards. This can create delays of 4 to 8 weeks, with the shipment sitting in U.S. Customs.
- Carrying costs of inventory: Inventory needs to be increased by 90 to 120 days, creating assets that cannot be delivered and increasing overhead costs.
- Increased cost of support: Depending on the time zones involved, getting something resolved with a U.S.-based company can only take a day or two. But if that company is overseas, resolving the issue could take a week or more.
- Total landed cost: Companies should analyze their total cost in getting a PCB or circuit card assembly to their door, including transit times, FDA and U.S. Customs delays, support time & travel, liability/shipping insurance, increased inventory and the lack of flexibility when sales increase or decrease in short time frames. The sum of the total could outweigh the cost benefit of cheaper labor found elsewhere in the world.
- Financial: Currency issues will be a constant challenge , requiring significant education of the accounting department if not familiar with these type of business exchanges.
- Problem resolution: Quality is compromised with resolution delays. Critical issues are not resolved quickly. If travel is required for an engineer, the cost of production is driven up considerably and there will be major delays in resolution.
- Ease of doing business: It’s much easier to do business within the U.S. for a mission-critical PCB that controls a medical device. Ease of design, prototyping, design-for-testing/design-for-manufacturing (DFT/DFM) and further engineering changes can all happen very quickly with a U.S. supplier.
- Communication barriers: Although English is an increasingly universal language, interpretation and understanding Gerber files can be a challenge. Making a design change and having it interpreted incorrectly can create major delays and become very costly.
Dennis Vetrano, sales & business development manager at Polaris Contract Manufacturing, Inc. – A Lockheed Martin Company, can be reached at firstname.lastname@example.org.