Consigning vs Turnkey

Consigned Kit vs Complete Turnkey (Parts and Assembly Service)
Everyone is trying to reduce cost where they can. I get that. I can understand a company wanting to purchase high dollar items on their own to save the mark up fee. Unfortunately, most customers, in my experienced opinion are not very good at it and actually go on to cost hundreds, if not thousands more dollars (for them and us) in administrative time kitting low cost line items. Not trying to insinuate the task is too technical; I just think it’s viewed as a menial task that quite frankly, people do not pay enough attention to. And I am referring to not just the task itself, but the economics of it.

The challenge also stems from customers having little to no experience with how tape and reel is mounted and utilized on an automated SMT equipment  line.  I would say that working with customer consigned kit shortages is the number one impedance to process throughput, efficiency and accuracy. The line stoppages we continuously see addressing shortages “on-the-fly” among other clarifications  are by far the biggest impedance to schedule and impact to our bottom line. Not to mention the quality risks associated with breaking down factory reels into smaller re-labeled packages.

 

Buy your kit pre-assembled! Let the distributors pull the parts!!
If you are working with a clean, up to date BOM, with valid part numbers and alternates listed (which you should be anyway…right?), it is far less expensive for us to import your BOM into an online distributor such as Digi-Key, Mouser or Newark and place your order online. Besides after paying someone hours to pull parts from old inventory / stock, there is always something you have to order anyway! In 1-5 days you have a complete kit come in the back door that can process through to receiving while simultaneously being loaded on to a feeder at the same time. Handling is minimized to a) buyers time + b) operator who is receiving and loading the feeders.

 

How Consigning your parts too often negatively affects our Bottom Line
Once we receive a customer’s consigned kit, we too have the administrative burden of reversing the entire process and verifying your items to the BOM. Too often the contents of some of the bagged items are incorrect, the labeling may not match the BOM, or we do not discover until the part is being installed on the line that there were not enough provided.

While we routinely discover kit errors and present them to the customer as part of our service, this exercise can’t be predicted and quantified  at the time of the quote, the administrative function of correcting the customers errors in kits is not factored into our cost.

 

Customer Consigned Cost Example:
Customer’s personnel spends 6 hours pulling, verifying, re-bagging, labeling and kitting 109 line items with an average line item cost of $1.35

Labor Cost = (with a median overhead burden rate of $37/ Hr) This effort  of 6Hrs x $37/Hr costs $222.00! vs Parts cost = 109 items x $1.35 = $147.15

Summary: You spent $222.00 in labor kitting up $147.15 worth of parts! Note that you technically just paid a 151% mark up on your parts!  Typical mark up from TJM to procure parts is 13-20% , depending upon order quantities and product value, once minimums for shipping and handling are covered. It just doesn’t pay.

If we haven’t convinced you to let us handle the parts please see below for guidelines on affective kitting for CCA builds.

 

Key Points for Consigning kits / parts / PWB

  • Attrition – Surface mount components are preferred on tape and reel. TJM can use cut tape, but only if there is enough to tape to mount into our feeders. Please note the following spares (attrition) quantity needed on the tape for the passive components.
    1. 0805-1206 – 25 extra pieces
    2. 0603 – 50 extra pieces
    3. 0402 and 0201 – 75-100 extra pieces.

*Also note that this requested attrition is for each set up. Parts will be lost during removal and re-install of the parts on feeders. If your job is being set up on the line more than once, you need to multiply each set up x requested attrition.
 

  • Properly Identify Part bags / packages to your BOM – If you’re providing alternate part numbers that are not listed on the BOM, our quality system views that as a potential error, an incorrect item and we will need to verify them with you. It would be pro-actively helpful if you just noted on your BOM, or added a list of alternates to your BOM, so we know the item was not provided in error.

 

  • We don’t count your parts – I think it’s important to note here that on consigned parts kits and materials that we verify that the item is provided and present, we DO NOT count the quantity of each and every resistor and capacitor in every bag of consigned parts. If we did, our NRE cost to set up a CCA build would be almost 2-3X. You’re providing the kit, so we’re counting on your personnel to have the correct part and quantity pulled and also have it correctly identified to the BOM.

 

  • Verify Your Advanced Packages /BTC’s – BGA’s, QFN’s and any other Bottom Terminated Component should be verified to the PWB footprint by the customer prior to sending the kit. Too often we realize footprint errors in these devices on the line, at placement. You cannot just hand solder these component types on later, they will require a special reflow process and very likely custom tooling to install after the unit has been populated and reflow soldered.

 

  • Incoming Inspection of PWB – For customers who prefer to provide the PCB, please note that a full incoming inspection of the bare board is NOT performed or included in the “assembly labor” quote. We will provide a cursory, manufacturability review, but will not be verifying fabrication notes, hole sizes, dimensions or verifying materials certifications. Customer assumes responsibility of board condition and quality. This is most critical when press-fit connectors are being used. The hole sizes should be verified.