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Code: EP38

Introduction
Some key requirements of a system
What the cost-estimating part of the system should offer electronics manufacturers
What the cost-recording and monitoring part of the system should offer
An example system

Introduction

An essential element in today’s electronics business management is the ability to support speed into the marketplace with accurate cost-estimating linked to a progressive cost-recording and monitoring system. This should be capable of use for preparing quotations at an early stage in design and enable the creation of key financial milestones in product development, as well as becoming the basis for subsequent ‘actual’ cost-collection and cost-reduction programmes.

In this respect, the rising value of today’s assembled circuit boards creates the need to have more accurate monitoring and control of component wastage and the potentially high labour cost parts of the assembly sequence. The concept of logging yields through all production stages has long been an essential control method on high volume electronic component production lines, for example in silicon chip circuit manufacture. It is the basis on which their statistical process control (SPC) is founded.

For electronic assembly in smaller and medium quantities the burden of acquiring yield information at every stage is often too high, but by limiting data collection to a few key operations and by applying estimated ‘parts per million’ defect levels (e.g., based on pincounts) to cover the later stages of assembly, rework and test, a cost-effective solution is achievable.

Senior executives in the industry who are committed to Design for Manufacture have been quick to recognise the commercial value in training their design teams to do the initial cost-estimating for the products they are creating. Early feedback! At least the costing software should assume this approach even if, in the event, the results are later fine-tuned by production engineering.

For this purpose, enabling it to work within or interface directly with existing CAD systems is a useful goal. The introduction of ‘concurrent engineering’ practice has made this type of multidiscipline approach vitally important. Major software companies in this field have been slow to integrate costing within their CAD programs. This is unfortunate because much of the data needed is already generated by most CAD systems.

In the past, many OEM companies have tended to include activities in the overheads that are highly product-sensitive and preferably should no longer be hidden there. For example, any accurate approach should include the requirement to cost such activities as kitting, cleaning, inspection and rework, and packing & shipping as direct labour costs.

For many electronics companies, maximising added value per unit of time of their ‘scarce resource’ is the key to profitability, especially in contract assembly. The system should be sensitive to this parameter and provide relevant data.

Costing equipment assembly on an ‘as it happens’ approach is gaining favour, especially in connection with the use of ‘just-in-time’ supplies. It has the advantage of simplifying paperwork by combining each operation and its associated material additions on the same spreadsheet line. An example is shown in Table 3 for equipment assembly.

Some important requirements of a typical modern method are reviewed. They must combine those cost-estimating and cost-monitoring elements that should be linked to each other and, wherever possible, networked to the overall financial and technical management system of a company.

Some key requirements of a system

The method should cover the pyramid of materials and individual printed board assembly through to completed equipment and total system product costs. By allowing the user to accept, ignore or add to the list of assembly processes covered, it should be suitable for application as a simple ‘first shot’ estimator at the outset of a project or quote (e.g., as a ‘scarce resource’ costing method), or as a sophisticated and detailed analytical tool applicable to monitoring and control at any time during project progress.

— A ‘what if’ facility should be included for management use in both contract assembly and OEM activities. For compatibility with typical ‘standard’ cost and ‘actual’ cost collection methods, the system should operate with either loaded or unloaded labour rates defined by the user.

— The ability to handle board assembly costs using a wide variety of different assembly methods, sequences and procedures. Today, surface mount printed board panels may contain either identical stepped-and-repeated circuits or all different ones as part of the assembled equipment kit. The divide between handling and testing as multiple circuits, and then into single circuits after break-out, requires considerable flexibility.

— The ability to cost board assemblies on a ‘stand alone’ basis for contract work, or as part of an integrated equipment costing system for OEM use.

— Presentation of individual process costs.

— To enable easy routine calculation of WIP value, the costing should indicate the percentage of total cost reached after each operation stage.

— To simplify system application, users should be asked to respond, on screen, to questionnaires covering the required product and the production equipment used to make them. From these inputs, costs should be calculated automatically on related spreadsheets.

— Standard modification control charts should be integral within each spreadsheet, so that the cost effects of change notes can be recorded and monitored.

— For international application, user selection of the currency signs to be shown on screen and print-out (e.g., £, $US, Euro [ E]) is essential.

— Availability for use in popular software systems, e.g, Microsoft Excel, Lotus 123W. Note that the conversion capability of existing commercial spreadsheet software is still inadequate for complex files with linkages. ‘Formula failed to convert’ is the Microsoft message.

— Layout of spreadsheets tailored to standard paper sizes, e.g., A4, A3.

What the cost-estimating part of the system should offer electronics manufacturers

Bill of Materials (BoM)

— For each board assembly, a BoM with a line count capacity of up to 1500 different component or item types per board.

— For equipment and system manufacturers, a combined BoM that includes assembled boards and other items as incoming materials alongside related process steps, i.e., the ‘as it happens’ approach. This must accommodate both external purchase and internal manufacture of board assemblies.

— Extension of individual part prices to cover quantity and price per circuit, batch and project.

— Estimated yields at individual part and/or average overall level are needed to guide purchasing activity and enable advantage from supplier price breaks.

Printed Board Assembly

— For in-house manufacture, give a rapid and accurate total cost of assembled printed boards at a minimum of three different levels: e.g., prototype and two production quantities at output rates and labour rates and efficiencies of the user’s choice – with and without cleaning.

— Indicate the cost of each individual process, inspection, test and rework step, but also show the collective cost of inspections, rework stages and electrical tests as separate parts of the total assembly cost.

— For each mechanised assembly process step, indicate the number of machines (or proportion of one machine) needed to give the output rate specified by the user.

— For manual process steps, show the number of operators (or proportion of one operator’s time) needed to give the required output rate.

— Display the number of operator-hours required to set up, assemble, inspect and test the daily output batch. Set-up costs should be treated separately from operation costs.

— Show the required time in working days to complete an order based on the data inputs.

— Operator and machine throughput rates and estimated defect levels to be defined by the user.

Equipment Assembly

— Show the total cost of equipment manufacture using either internally assembled or externally purchased boards, plus all other materials and assembly and test operations – again at several different quantities and output rates.

— Allow easy extension of spreadsheets to cover increased numbers of different boards, extra items and process steps in equipment assembly.

— Indicate total direct material costs for each equipment, for the daily batch and for the total project, including yield losses.

— Show total direct labour costs from stores ‘kitting’ through to assembled, soak-tested equipment out of the door.

What the cost-recording and monitoring part of the system should offer

— In most electronics equipment and board assemblies, by far the largest cost element is in the components. The method of computing the Bill of Materials should allow instant update of the effect on total costs of any rise or fall in component or other material prices paid and of changes in production yield or labour rates. These changes must be automatically reflected in both board assembly and equipment costings.

— For each different product, give the cost of each individual process stage.

— Automatic indication of progressive, stage by stage, inventory valuation data.

— Demonstrate the effect of yield improvement on overall costs.

— Provide a modification control chart integral with each spreadsheet.

An example system

A mixed labour-based and machine-based costing system that has been used widely in the UK is given as an example of the type of approach that embodies most of the above criteria. It was developed first in a large electronics contract assembly company whose manufacturing facility contained a mixture of highly mechanised production equipment followed by a series of labour intensive operations. Later it was expanded by the NPL-based UK Surface Mount Club to make it suitable for OEM use.

For board assemblies required on a ‘stand alone’ basis or for integration within an equipment it provides accurate total cost estimates for prototypes and two different production levels. Output rates, labour rates, labour efficiencies, component yields and process stage yields are all selected by the user.

Related Bill of Material options include a broad range of board capacities. There are nine sets of related BoM spreadsheets covering between 55 and 1000 different component/item types per board assembly. The user selects those most suited to the application. Each is linked to its own assembly process spreadsheet to provide component count and other data. Extension above 1000 items is an option. Table 1 shows an example board assembly BoM.

For individual boards, the assembly operations shown in Table 2 are costed by user selection of the processes to be applied to each and by defining labour rates, batch sizes, the number of passes through each process and the relevant set-up and operation times in seconds or minutes. All data are sourced from the associated BoM and questionnaire (not shown).

As visual inspection, rework and electrical test are usually the largest elements of labour cost, these are identified as separate parts of the total labour cost. By giving the option to include several retest and rework cycles, high cost activities that are sometimes hidden in overheads become exposed to management.

To identify key production capacity requirements, each manual or automatic machine operation is assigned a throughput rate, for example, 1500 component placements/h for a pick & place or auto insertion machine. The figure chosen can be based on a conservative view of the manufacturer’s claimed rate or on prior work study data.

A useful consequence of this approach is the ability of the system to show the number of operators or machines (or proportion of one machine or operator) needed to achieve the specified output rate. See Columns K and L. Also, once the user has defined the numbers of hours worked per shift or day, the required time in working days to complete the order is shown. This information is of great importance in the early stages of production planning.

In Table 2, Columns Q to V indicate the set-up and process times per circuit for each operation. Columns X, Z and AB give the cost of each operation per circuit. Column AF shows the percentage growth of cost through the processes for WIP value reporting purposes.

At the foot of the page, the respective totals of cumulative cost and operator requirements are added to the materials data imported from the BoM spreadsheets. Modification control charts are built into all spreadsheets – not shown here.

The A3 size combined BoM and equipment assembly (‘as it happens’) spreadsheet is too large to publish here in its entirety, but a vertically compressed version with limited item count is shown in Table 3. Red ink indicates user entries for materials, activities and purchase price estimates. User process and set-up time estimates are shown in green. Supplier data are listed in the spreadsheet, but outside the tables.