From a purchasing perspective, it is important to consider the likely postmanufacturing support needs of the product during the initial EMS provider selection process. Questions to ask include:

• Are the volumes and commonality with similar products sufficient to use standalone repair depot operations that may have operational synergy relative to test platforms, material procurement and technical expertise?

• If lower volumes indicate the production source may also be the most cost-effective repair depot source, does the EMS provider have the infrastructure to support the added administrative, technical and logistics requirements?

• Are there examples of projects whose complexities are similar to the OEM's needs?

• Are the necessary documentation, product field failure data and scope of work requirements available and defined well enough to accurately get a repair depot quote?

Product dynamics drive the question of using an EMS provider rather than a standalone repair depot provider. Standalone repair operations value products with high packaging or component commonality, large repair lot sizes and multiple service needs because they can set up an operation that focuses on a narrow range of similar products.

Comparatively, a lower-volume product with more unique characteristics may not be a good fit for a standalone repair operation. There may be little synergy to offset the overhead associated with supporting the product. In those cases, the synergy may be found in compatibility with existing production operations or within an EMS company that understands the requirements associated with repair depot services and can share sufficient existing production, administrative and technical resources to support the program.

Fawn Electronics supports both EMS and repair depot services and has identified key considerations in ensuring a smooth and cost-effective repair depot operation. These areas include:

• Parts supply strategy,

• Documentation,

• Test strategy,

• Logistics considerations and

• Cost reduction focus.

Parts supply strategy

When a product is in volume production, there is usually an existing supply of parts. If a component becomes obsolete, a redesign effort may minimize the need for end-of-life purchases. However, in lower-volume or heavily regulated products, the cost of redesign and/or recertification may not be recoverable in a reasonable payback period. In the case of industrial, defense, avionics or medical products, there may be requirements to support a very long product life cycle without redesign. In those situations, parts supply strategy is critical. The support required from the EMS provider can include:

• Ability to receive, screen and appropriately store end-of-life parts inventory consigned by the OEM;

• Ability to locate and validate integrity of hard-to-find component inventories through reliable component brokers;

• Ability to identify likely parts issues and offer potential alternatives in advance of part nonavailability;

• Ability to provide internal engineering support or work through established third-party relationships to develop an appropriate solution where redesign is possible; and

• Ability to deal with materials integrity and/or availability issues driven by RoHS compliance requirements.

Documentation

Having appropriate documentation for a new product is generally not an issue. However, many repair depot requirements evolve over time and lack appropriate documentation. Consider the following example.

One of Fawn's production customers bought a competitor. Continued support was necessary for product lines transferred in the acquisition because they had long product life cycles, but product documentation for some of the more mature products was very limited. In one case only photocopy films of the microprocessor documentation were available, and nonrecurring engineering charges were incurred as employees worked through the lack of documentation.

It is ideal to have as complete a package as possible. Detailed component documentation is critical in addressing obsolescence issues. Detailed product operating procedures and schematics are important in testing and troubleshooting.

Test strategy

Test development can range from testing performed on a customer-supplied test unit with a detailed test standard to tests developed because a functional test was created in conjunction with a cannibalized working unit. When customer-supplied test units are used, documentation on test equipment repair and maintenance should be provided. If test documentation is limited, an EMS provider's track record in test development and custom tester support should be carefully evaluated. Unit repair time and total cost will be driven by the speed at which failures can be identified and corrected.

When test units are not available, one option is to modify a known-good unit for use to test other parts. Another option is to establish a baseline with a known-good unit and a device such as the Huntron tracker test apparatus, by documenting the signals and then comparing the signals with those emitted when failed units are tested.

Logistics considerations

From a logistics perspective, there are several key issues to evaluate in repair operations, including:

• Returned unit handling and packaging procedures;

• Repair cycle time;

• Forecasting purchased materials requirements; and

• Storage of raw materials, returned/repaired units and test equipment.

While higher-volume repair depot operations may have a standard unit price for repair, lower-volume, complex products are often priced on the basis of time and materials. In those cases, returned-unit handling is very important because a poorly handled or packaged unit that is further damaged in the transit process will cost more to repair.

Repair cycle time is important in two regards. First, the time to repair and return a unit may be part of the OEM's service guarantee. The best way to achieve short cycle time is to carry a buffer stock or returned goods inventory (RGI) of repaired units sufficient to meet demand. As damaged units are received, they can be immediately replaced with a unit from RGI. The damaged unit is then repaired and added back to RGI.

Another aspect of cycle time is determining which units cannot be repaired cost-effectively. Unless there is no option for replacement with an RGI unit, there should be a mutual understanding between the EMS provider and the OEM about troubleshooting time limits and the process for classifying a damaged unit as nonrepairable. This is particularly important when pricing is based on time and materials.

RGI and the raw materials needed to support ongoing repair operations incur both the carrying costs associated with financing the inventory and the costs associated with providing appropriate storage space. Consequently, visibility into ongoing repair demand trends and historical failure patterns/materials demand trends can be helpful in understanding both raw material and RGI inventory requirements.

It is important to evaluate the EMS provider's systems for forecasting demand and ensuring appropriate levels of inventory are maintained. If there are seasonal demand variations, it can also be important to understand the EMS provider's ability to deal with peak demand and any strategies the company may have for lowering the costs associated with widely fluctuating demand patterns. Finally, minimum-buy material must also be tracked carefully, as minimum-buy quantities typically increase inventory liability beyond anticipated program demand. It is important to understand an EMS provider's system for ascertaining costs and tracking minimum-buy and excess material liability.

Cost reduction focus

Repair depot programs can have inherent cost increases as the program comes to a close, regardless of how committed an EMS provider and OEM are to continually reducing cost. The reason is that most programs have a dedicated overhead structure that is separate from the number of units processed. Typically, work cell space is allocated to each repair project, including specialty test equipment and tools required for that particular project. Warehouse space is likely dedicated to RGI and segregated raw material storage. Normally, the product requires a small core of administrative and technical personnel with very specialized knowledge. As the demand volume drops, overhead cost will increase. A sourcing strategy that offsets drops in end-of-life demand with increases in complementary repair depot projects can help to lower project costs. The addition of refurbishment or remanufacturing activities to an existing repair depot operation can also help in overhead absorption.

Other ways to minimize cost include:

• Establish a minimum refurbishment lot size;

• Optimize standard procedures such as order entry, retest and relabel;

• Use Web tools to provide shared visibility into demand at both the OEM and EMS provider; and

• Evaluate the cost benefits of having the EMS provider work directly with end users in the return process.

Repair depot operations can be outsourced even for complex, lower-volume projects. The key to long-term success is understanding the project's scope and elements of cost, selecting a qualified supplier and then teaming to reduce likely cost increase issues over the life of the project.

Kim Boykin is vice president of operations at Fawn Electronics and is based in its Wilson, N.C., production facility. He can be reached at: kimb@fawn-ind.com.