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VR Industries Blog

Should Your Business Re-shore Its PCB Assembly?

Sep 19, 2016 11:07:06 AM / by VR Industries

As with all manufactured or processed goods, businesses in the market for printed circuit board assembly go where the money is - or isn't, as the case may be. For the most attractive costs, companies are willing to outsource operations.

Yet recently, economic factors have sparked reshoring initiatives across the manufacturing sector and brought American businesses back stateside, even convinced international firms the U.S. is right for their dollar, euro or yuan. What changed, and why should companies in need of PCB assembly partner with an American organization?

Where PCBA was yesterday and today
In the past, the majority of electronics manufacturing came from China - according to research from Investopedia, Chinese exports accounted for nearly 9 percent of global trade as of 2015. Why? Low labor costs, lax regulations and ease of access to carbon-rich metals necessary for circuit board production and assembly.

However, in recent years the U.S. has squeaked by as an increasingly competitive manufacturing hub for cost-conscious enterprises. In fact, data compiled by Boston Consulting Group named the U.S. and Mexico as the only two countries of the top 25 manufacturing nations in the world to rise in cost competitiveness over the last decade. China, on the other hand, slipped by between five to nine percentage points. The other 22 manufacturing epicenters saw similar or more dramatic declines.

Though BCA still ranks China as the single most cost competitive manufacturer - with the U.S. a close second - a 2014 manufacturing cost index places China's manufacturing cost averages within a margin of error the U.S. has the means to exploit. Essentially, for every dollar spent on manufacturing goods in America, the same production processes would only cost $0.96 in China.

Let's look at how reshoring could make up for the four-cent difference by delivering value to companies looking for PCBA.

Why reshore PCBA operations?
For small to mid-sized volume needs, businesses outsourcing their PCBA services may be overspending in a number of immense ways. Sourcing Overseas - ironically, an organization dedicated to connecting businesses with outsourcing partners  - spells out many of the biggest issues plainly on its website:

  • High volume only - Order levels may be higher than partners require
  • Production deposits - Businesses are expected to pony up 30 percent of costs upfront
  • Pay before you procure - Full payment must be met before shipment departs

Generally speaking, these transaction styles are nowhere near as prevalent in the U.S., if they exist at all.

Furthermore, regardless of which country electronics makers outsource to, a lot of risk comes with placing large geographical distances between intellectual property owners and PCBA manufacturers. Foreign governments may not stringently enforce regulations that align with those in regions where finished products will eventually be sold. Companies will answer in the marketplace for their supply chains when issues arise such as counterfeiting or workers' rights violations, let alone if quality assurance takes a nosedive because of a lack of inspection processes.

But outsourcing concerns need not sound so nefarious - think about the logistics. To produce a product half a world away and ship it home takes time, time businesses won't spend waiting if they produce goods in the United States. Besides, every minute that passes exposes fragile goods to adverse environmental conditions. Therefore, businesses that outsource are forced to spend more on risk management tactics like contract negotiations for insurance and more comprehensive logistics tracking technology, all adding to the overseas sticker price.

So now ask yourself: Does that $0.96 on the dollar look like it's worth it in light of all these other factors? Electronics providers should consider these benefits and more when selecting their next PCBA partner. The difference could save costs, protect product quality, and simplify inventory management.

Topics: News, Printed Circuit Board Assembly

VR Industries

Written by VR Industries