SAN JOSE, Calif. – May 12th, 2005 – Many OEM’s have been looking at the possibility of having their metal fabrication needs sourced in the Far East, most specifically the Chinese mainland. Such a sourcing decision is mainly driven by cost considerations, especially if the project/program has monthly volumes in excess of 2,500 units. The OEM can elect to establish the source in-house, or have a Contract Manufacturer (ie. Solectron, Tyco, Sanmina, etc.) handle this for them. However, these “Chinese solutions” have several potential drawbacks that need to be overcome.
Most specifically: (1) how do they get local suppliers to support their engineering and prototype needs absent follow-on work; (2) how are the initial production quantities going to be supported, including quick response ECO’s; (3) how will short term volume needs be handled when they are quicker or in-excess of the longer lead time needed for cost effective off-shore production (air freight is usually prohibitive); (4) how will DMR’s/re-work be handled quickly and cost effectively; (5) how will production ECO’s be handled on an expedient basis; (6) delivery pull-in or push-out is difficult, if not impossible.
Without any doubt off-shore China production has substantial cost advantages for the correct projects when, and if, they are handled well. The labor cost is the most significant advantage, and there is no way to beat that locally. In recognition of this reality, and because of the drawbacks listed above, Airtronics has established an offshore sourcing program for a limited number of customers that need foreign cost with local support.
One of our China sources is for “hard-tooling” programs, where the projected volume and life cycle justifies the substantial up-front tooling cost. Simple parts may work at lower volume (ie. less than 5,000/mo.), but, for example, a card cage intensive chassis would unlikely be cost effective below 2,500/mo. due to tooling (such a chassis could easily run in excess of $500,000 for progressive die tooling). Production lead-time, after tooling approval, would run 6-8 weeks for surface shipping, and re-schedules in or out are usually not allowed.
Our other China source is focused on “soft tooling”, and this can work well for projects with volumes in excess of 500/mo. However lead-time (ie. 6-8 weeks) remains an issue that needs to be balanced with local production since re-schedules are not feasible for off shore production.
In summary, the Airtronics “Off-shore Program” is intended to help specific customers and projects take advantage of China cost while sustaining Local support and production.
Airtronics™ is a trademark of Airtronics Metal Products, Inc.
Contacts:
Jeff Burke Pres/CEO
Airtronics Metal Products, Inc.
408-977-7813