This is the first installment in a series chronicling Zebulon Solutions’s efforts to keep the supply chain local for a large product development project that we’re working on. We don’t know where this will end up yet, but we’ll report on the path we take along the way.
Zebulon Solutions is a productization services company–we help our customers turn their R&D projects into manufacturing ready products. We don’t own the product, and often times we don’t even do the design; we just help make it manufacturable. And help is a key word here–we’re rarely the only voice, and we don’t always get the last say in decisions, even when it comes to manufacturing and supply chain.
So we have a major customer, who shall remain nameless (and moreover, somewhat deliberately disguised–we take confidentiality seriously) who is designing a large scale, system level product that we shall call System X. Think of it as a piece of capital equipment with a BOM cost running into the hundreds of thousands and a number of significant subsystems. We’re not doing the design but we are tasked with setting up the supply chain, from components to subsystems to final assembly and test, and also in helping to optimize the design for manufacturability, testability and the supply chain.
Honestly, keeping it local is not a hot button for our customer. Other than a firm ban of using China sources, for IP reasons, we have no direct customer imposed constraints on where we build this nor on the supply chain. What we have are requirements on performance, lead time, price, order flexibility, and end delivery point. We’ll let these drive the supply chain, and see if they lead to a local solution or no.
- The product is highly complex, a product in some ways pushing the leading edge beyond anything out there.
- This means that there will likely be some pretty challenging assemblies and testing challenges
- It also means that churn is likely
- Both of the above favor a local supply chain
- Lead time is also an issue
- Again this favors a local supply chain
- As always price is an issue. But our customer is wise enough to look at cost of ownership
- Development pricing seems to favor keeping it local–less cost for supplier quals, getting on airplanes etc
- But unit pricing, as always, makes us think seriously about low cost regions, for all the normal reasons
- For non critical components, of which there are of course many, why wouldn’t we choose the lowest cost supplier? Which are often Asia based.
- The customer does have one somewhat unique requirement, in that they need to be able to order these systems in batch size = 1 increments, at sporadic intervals, with little to no forecasting
- This is what drove us to start thinking local, because we need a lot of flexibility and will have to scramble to hit lead times
- The end delivery point is tbd, but most likely Asia
- This does not favor a local solution, but the tbd aspects keep us from looking globally, at least for now
Nothing is locked in yet, but the requirements are at least causing us to think that it would be good to try to keep as much of the supply chain local. Not quite sure what local means: in Colorado? In the US? In North America? And also, as a complex system, it’s not as easy as asking Where is it built? as we need to look at components, subassemblies, subsystems and system integration.
To date we know that one of the major buy subsystems will come from Massachusetts as a sole source for technical reasons. There is a custom interconnect component that we have identified a number of US sources for that should work out, and we are starting to look at Colorado based PCBA houses for doing board level assembly. But many of the electronics components, while coming out of disty, are in fact Asia built, and that is already causing us a few concerns on lead-time but also providing some favorable pricing. Many custom mechanical components as well, but we haven’t scratched the surface there yet.
Still much, much to do.
To be continued.