Budgets from assembly house

[Steve Sousa]

Hello:

Where i work we design embedded systems, obviously the pcb design and parts
list of those systems are later sent to an assembly house that stuffs the
pcb, solders it, etc.
That same company buys the parts we specify from distributors, my question
is:
Apparently they don't give prices of components, or pick and place cost or
soldering, we send them the files and they give a budget, or proforma for
the whole board.

Is this common practice or are we being screwed?

I say this because it's is a pain to get an optimized parts list when they
usualy say "those are cheap, those are expensive, we don't have that, tell
us what you need and we'll see if there's anything similar in stock" but
they don't give a list of their "on-stock" parts...

Best Regards

 

[Joerg]

Hello Steve,

They may not want to or may not always be allowed to disclose their
parts cost. Very large houses buy huge loads and have negotiated special
prices. Often they don't have to go through distributors where others
may have to.

My experience has been similar. A parts list is supplied, the board
specified, along with expected quality levels, testing, QC and
everything else. In return a total cost is quoted, IOW "the bid". That
is compared to other houses and an order is placed.

Two things I do feel are necessary and that was usually no problem:

Preferred parts list: I like to see a listing of their "jelly bean stock
list". Even without pricing info you can still compare, say, a BSS123 on
their list versus your favorite FET. The 1k budgetary price of a major
distributor that carries both is often a good indicator which type will
be the better deal. Theirs will be a tad less expensive but you will
have to go through your internal release process which costs money, too.
Not just a part of your salary as the ECO generator but also that of the
doc center folks, QA and others involved in the release.

Having an engineer from the assembly house in for design reviews: At
least there should be a cost review. Often we were asked whether a
certain part could be substituted to drop costs. At that point the
savings had to be on the table so we could make a decision whether it
was worth the effort. Next we sat down and hashed out test procedures.
If these can be tailored to the gear and training they already have this
will save cost, too.

Trust builds up over time. After one or two successful production starts
I typically had no problems finding their part pricing. They simply told
me, trusting that I would not broadcast that information. A contract
phrase to that effect helps. A border or an ocean between them and you
doesn't have to be a problem here either.

Regards, Joerg

 

[James Morrison]

Hello:

Where i work we design embedded systems, obviously the pcb design and parts
list of those systems are later sent to an assembly house that stuffs the
pcb, solders it, etc.
That same company buys the parts we specify from distributors, my question
is:
Apparently they don't give prices of components, or pick and place cost or
soldering, we send them the files and they give a budget, or proforma for
the whole board.

In my experience, its not unusual for assembly houses to not give prices
of individual components. This is because that is where their profit
is. They tend to be able to arrange for better pricing with
distribution because they can buy more than one company itself can.
That is also why they want you to use parts they already have.

In one case I was involved in, the assembly house was involved early in
the design when a component was highly priced due to it being so new.
Over the years the price dropped dramatically (like $50 a pop) but
purchasing never new because they didn't purchase the part directly. So
the assembly house just pocketed the difference and never told us. The
only reason we found out was that the account manager let it slip that
the price had dropped significantly (and thus we should use it in a new
design) and this set off alarm bells that lead to the discovery.

Is this common practice or are we being screwed?

I say this because it's is a pain to get an optimized parts list when they
usualy say "those are cheap, those are expensive, we don't have that, tell
us what you need and we'll see if there's anything similar in stock" but
they don't give a list of their "on-stock" parts...

In my experience, assembly houses that keep stock are more than willing
to give you a list of their components. If they don't have to hold more
inventory and all that expense they are usually more than willing to do
it that way. So this is unusual.

I would advise you to get quotes from a few sources. The assembly house
will want to tell you that they should be designed up front in the
process and blah, blah, blah. You are much better off to pay an expert
to do DFM type of stuff since you'll pay a lot but one time. If the
board house is involved with this you typically end up with a per-unit
cost. They won't call it that but they have to pay for their time some
way and that is their common billing method.

Then treat the assembly house like a service and look for a good deal on
a per unit basis. You'll probably want to make sure you have a contract
that states what will be delivered and who pays for rework and parts
that fail testing and even who does testing. There are lots of
variables in the cost equation: money, time, testing, quality,
responsiveness, integrity, flexibility, ....

After going through so much I can see why some companies just say,
"Screw it" and get their own assembly equipment. But my company isn't
that large (yet) so we have to make due.


Cheers.

 

[Joerg]

Hello James,

In my experience, assembly houses that keep stock are more than willing
to give you a list of their components. If they don't have to hold more
inventory and all that expense they are usually more than willing to do
it that way. So this is unusual.

Many of them do have stock but it is behind chain link fence and
contractually still "belongs" to the manufacturers or distributors.
Meaning they have a sweet deal where they only pay for parts when they
actually move them onto the SMT machines. Like having a fridge full of
different ice cream cones but you only pay when you eat one ;-)

... You are much better off to pay an expert
to do DFM type of stuff since you'll pay a lot but one time. ...

Amen. If every company did that there would be a lot less production
hick-ups. The sad truth is that they often wait to hire a consultant
until a serious issue arises. IOW when some level of panic sets in and
it has percolated up to board room level.

After going through so much I can see why some companies just say,
"Screw it" and get their own assembly equipment. But my company isn't
that large (yet) so we have to make due.

Even larger ones I consulted for often didn't want to run their own
assembly. It just didn't make financial sense.

Regards, Joerg

 

[Pooh Bear]

Hello:

Where i work we design embedded systems, obviously the pcb design and parts
list of those systems are later sent to an assembly house that stuffs the
pcb, solders it, etc.
That same company buys the parts we specify from distributors, my question
is:
Apparently they don't give prices of components, or pick and place cost or
soldering, we send them the files and they give a budget, or proforma for
the whole board.

Is this common practice or are we being screwed?

Depends who you use. I've seen individually costed BOMs and ppl who wouldn't
let you know anything.

Open book pricing makes so much sense since you can see where a component
substitution might make sense.

I say this because it's is a pain to get an optimized parts list when they
usualy say "those are cheap, those are expensive, we don't have that, tell
us what you need and we'll see if there's anything similar in stock" but
they don't give a list of their "on-stock" parts...

As a recent example, I noticed a item ( a heatsink actually ) @ 87 cents on a
BOM that was clearly simply not a popular local item. I queried an alternative
and they offered one with slightly better performance, very similar footprint
and about 25 cents IIRC.

The outfit in question charges 30% over the costed BOM for assy and test btw.

Graham

 

[Spehro Pefhany]

Even larger ones I consulted for often didn't want to run their own
assembly. It just didn't make financial sense.

Hence the big contract assembly houses such Celestica, Soelectron,
Sanmina, Flextronics and Jabil--- each of which have more than $1bn in
annual revenue.


Best regards,
Spehro Pefhany

 

[Rene Tschaggelar]

Hello:

Where i work we design embedded systems, obviously the pcb design and parts
list of those systems are later sent to an assembly house that stuffs the
pcb, solders it, etc.
That same company buys the parts we specify from distributors, my question
is:
Apparently they don't give prices of components, or pick and place cost or
soldering, we send them the files and they give a budget, or proforma for
the whole board.

Is this common practice or are we being screwed?

I say this because it's is a pain to get an optimized parts list when they
usualy say "those are cheap, those are expensive, we don't have that, tell
us what you need and we'll see if there's anything similar in stock" but
they don't give a list of their "on-stock" parts...

I was in the same situation several years ago. Then
for a production run, we asked for quotation and
released it to them to purchase the parts, as they
said their were organized and able. The huge surprise
came afterwards. Their "able" purchaser used to buy
sticks for the best price. The leftover sticks of special
and expensive parts were handed over to us, and did cost
as much as the whole production. Ever since then I
do supply the parts, except the trivial stuff such
as 1206, 0603 R's and C's. This has the advantage that
I do have my stock parts, I do have the right footprints
and the prototype has the same parts as the production.

When ordering from abroad, what I do regularly, the
customs handling fee can be laid over to a much biger
number of parts.

Recommended.

Rene

 

[James Morrison]

Hello Joerg,

Hello James,


Many of them do have stock but it is behind chain link fence and
contractually still "belongs" to the manufacturers or distributors.
Meaning they have a sweet deal where they only pay for parts when they
actually move them onto the SMT machines. Like having a fridge full of
different ice cream cones but you only pay when you eat one ;-)


Amen. If every company did that there would be a lot less production
hick-ups. The sad truth is that they often wait to hire a consultant
until a serious issue arises. IOW when some level of panic sets in and
it has percolated up to board room level.

Of course the panic tends to drive up the cost of the solution. So its
not all bad on my part since I sometimes get called on to help out in
these cases. Of course, I'd prefer (and my doctor would concur) that it
would be better for everyone to be involved up front.

Even larger ones I consulted for often didn't want to run their own
assembly. It just didn't make financial sense.

I contend that there is more in the cost equation than just money. Turn
around time, the ability to change assembly line priorities as market
demands, the ability to really understand the process and get good DFM
practices, develop test strategies that really match the assembly
process, higher quality, happier customers, ....

I'll agree that for lots of us it doesn't make sense but there are a lot
more variables than just the cost of the equipment (that you can
amortise over many years).

Just my $0.02CDN for what its worth.

 

[Joerg]

Hello James,

Of course the panic tends to drive up the cost of the solution. So its
not all bad on my part since I sometimes get called on to help out in
these cases. Of course, I'd prefer (and my doctor would concur) that it
would be better for everyone to be involved up front.

It's similar in the medical field. A friend went to have an angiogram.
He felt nothing wrong with himself and did it only to please his doctor.
Sure enough they found a 90% blockage, meaning he was probably just
weeks away from a massive heart attack.

I contend that there is more in the cost equation than just money. Turn
around time, the ability to change assembly line priorities as market
demands, the ability to really understand the process and get good DFM
practices, develop test strategies that really match the assembly
process, higher quality, happier customers, ....

I'll agree that for lots of us it doesn't make sense but there are a lot
more variables than just the cost of the equipment (that you can
amortise over many years).

True but it gets to be increasingly difficult in "modern" countries.
Taxes on inventory (machines plus stock), workers comp insurance rates
and so on. Many times I have seen those costs swamp the advantages of
having your own production lines. When you are outsourced with
production it becomes much easier to move it into a biz friendlier
region should such cost pressures arise.

Regards, Joerg

 

[Steve Sousa]

Hello Steve,

They may not want to or may not always be allowed to disclose their parts
cost. Very large houses buy huge loads and have negotiated special prices.
Often they don't have to go through distributors where others may have to.

My experience has been similar. A parts list is supplied, the board
specified, along with expected quality levels, testing, QC and everything
else. In return a total cost is quoted, IOW "the bid". That is compared to
other houses and an order is placed.

Thank you all for your replies, i'm glad to hear this is not unusual, i'll
concentrate my efforts on getting a parts-list.

Best Regards

 

[Mark]

Thank you all for your replies, i'm glad to hear this is not unusual, i'll
concentrate my efforts on getting a parts-list.

Best Regards

I work on much smaller scales than the previous posters. I have made
100 of items at a time. My normal practice is to make a parts list
(using Excel) from a component suppliers catalogue 100+ prices (one
who I know to be cheap) and pass this onto my kit of parts supplier
who always quotes cheaper than the cheap catalogue price. This way I
know I am not paying overtly more than I need to. These parts get
passed onto an assembly house.