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Molding Services for Contract Assembly Partnering for Cable Assemblies

BY  STEVE BURK

Wire,  cable and  cable assemblies  are at the  "perceived"  low end of  the supply  chain. They  are the commodity  products of  the electronics  industry.  This perception  has created  a cottage  industry of  cable assembly  companies,  with over  800 companies  in North America,  a $16 billion  market and  a handful  of large companies  with local  presence.  Within this  large market,  there are  only a few  $100 million  companies.

As  a result,  cable assembly  products are  difficult  for original  equipment  manufacturers  (OEMs) or  contract manufacturers  (CMs) to manage.  This deficiency  stems from  the fact that  OEMs and CMs  do not manage  these commodities  like other  similar subcontract  commodities.  Core components,  such as semiconductors  and technology  products,  are managed  by commodity  teams that  closely evaluate  the supply  chain. More  often than  not, cable  assembly product  orders go  to the lowest  bidder with  the shortest  lead-time.  The focus  for interconnect  cable assembly  suppliers  must be on  their core  manufacturing  competencies,  material supply  chain and  management  depth. There  needs to be  a good fit  from "womb  to tomb."  As interconnects  become smaller  and higher  performance,  there will  be an increasing  need for strategic  partnerships.

Within  the electronics  industry,  discrete wire  and custom  round cable  assemblies  are the primary  cable assembly  types. Material  costs for  cable assemblies  are typically  50 percent  of the selling  price of the  product, and  labor costs  and gross  margins are  25 percent.  With this  in mind, the  primary focus  to achieve  cost savings  and predictable  delivery performance  should be  on material  management;  labor becomes  secondary.

Trends 
Although  lower cost  Asian cable  assembly suppliers  satisfy a  segment of  the electronics  industry in  North America,  the globalization  of the industry  has narrowed  the price  advantage  of offshore  manufacturing.  The North  American Free  Trade Agreement  has helped  narrow the  labor cost  advantage.  Streamlined  U.S. companies  have been  able to reduce  overhead rates.  This means  more competitive  domestic cable  assembly suppliers  and a reduction  in the internal  costs needed  to manage  the commodities  because the  hidden administrative  burdens of  working with  Asian sources  are removed.

More  and more,  large companies  are becoming  players in  this industry.  Growing numbers  of cable assembly  specialists,  such as Volex  Inc. (Quincy,  Mass.) and  The JPM Co.  (Lewisburg,  Pa.), connector  companies,  such as Molex  Inc. and FCI/Berg,  and distribution  companies,  such as Arrow  Electronics  Inc. (Melville,  N.Y.), are  expanding  into the cable  assembly market.  This is good  for the industry  as it helps  to provide  more structure  to the commodity  chain.

As  OEMs continue  to outsource  their products  to CMs and  cable assembly  companies,  the need for  cable assembly  partners will  continue to  expand exponentially.  So, what should  you look for  in a cable  assembly provider?

Discrete  Wire Assembly 
Look for  a supplier  with good  tooling and  termination  capabilities  because they  are essential  in this product  area. Good  cables start  and end with  good crimps  and terminations.  Good crimps  are not inspected-in,  therefore,  the manufacturing  and quality  assurance  process controls  must be solid.  Crimp heights  must be measured  and pull tests  completed.  In-process  controls need  to be audited  and monitored.

If  you have a  broad product  range, and  an extensive  backroom of  termination  tooling, this  prevents you  from having  to pay for  new application  tooling amortized  into the price  for the assemblies.  The result  will be a  corresponding  increase in  quality because  correct tooling  will be used.  The Achilles`  heel in this  industry is  good crimps;  they start  with properly  applied tooling  and consistent  manufacturing  process controls.

Custom  Cable Assembly 
For a  focused product,  such as custom,  molded interconnects  with embedded  electronics  or high-volume  parts, choose  a supplier  based on technical  capability  first, and  material management  and supply  chain capabilities  second. In-house  tooling and  design combined  with creative  talent is  a must.

The  key ingredient  is the company`s  technical  skill in assimilating  the tooling  and processes  necessary  to produce  the parts  within the  volume amount  and timeline  contracted.  Custom products  continually  evolve and  the need for  good problem-solving  and troubleshooting  skills is  important.

Core  Competencies 
Although  price is often  a determining  factor, make  sure to look  beyond the  obvious. Vendor  selection  should be  based on the  level of support  you plan to  provide. Every  company is  different,  but the trends  certainly  support more  turnkey and  vertical integration  in the supply  chain.

If  you are kitting  the materials  and the vendor  is only supplying  the labor,  the focus  should be  on technical  and manufacturing  processes.  Can the supplier  produce good  parts and  keep material  scrap to a  minimum? Does  it have the  ability to  manage the  materials  internally?

If  the supplier  is providing  turnkey solutions,  make sure  it has the  necessary  material management  and manufacturing  systems, complete  with a formal  engineering  change orders  system, in  place so the  correct materials  are there  when it is  time to build  your parts.  Then, and  only then,  do you need  to investigate  if the company  knows how  to build them.

Remember  that materials  are the main  factor. So  many times,  the issues  associated  with quality,  price competitiveness  and on-time  delivery are  associated  with not having  the materials  delivered  on time to  produce the  parts on time.

Understand  potential  suppliers  from the inside  out. Insist  on source  inspection  and evaluation  of their business  systems. How  do they manage  materials  and how do  they deal  with corrective  actions? Do  they know  how to problem-solve?  Can they respond  quickly to  change? If  you do these  things, you  will be doing  better than  most.

STEVE  BURK is president,  ISC Engineering  LLC, 1730  Evergreen  St., Duarte,  CA 91010;  (626) 357-8112;  Fax: (626)  357-6778;  E-mail: sburk@iscengineering.com;  Web site:  iscengineering.com.

Connector  Specifier February,  2000

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