Contract Manufacturing and Outsourcing can Lower Overhead
“Contract Manufacturing and Outsourcing can Lower Overhead and Increase Yields”
– Article published in Military & Aerospace Electronics Magazine, Viewpoint – Page 30
As the economy constantly shifts, contractors continuously seek new and innovative means of manufacturing products. This is particularly true for DOD contractors who have felt increasing pressure to minimize costs. To alleviate this pressure, many DOD contractors have turned to outsourcing as an efficient, cost-effective method of producing many of their systems.
Although many DOD contractors already have in-house manufacturing facilities, outsourcing can provide a viable means of lowering manufacturing costs, obtaining higher yields, and improving product quality. For most contractors, reduced production cost serves as the primary advantage of this alternative means of production. Outsourcing allows for significant cost cuts through the reduction of overhead, reduced headcount, and elimination of equipment and software investments.
Outsourcing can also provide many manufacturing advantages. For example, a skilled manufacturer allows contractors to focus on their core business with the confidence that their product is being produced by experts. Other benefits include higher yields due to automation and advanced equipment. Higher product quality comes with better training and improved process repeatability due to upfront process characterization. Significant time savings are achieved by increasing efficiency and eliminating back office tasks. Additionally, manufacturing cycle times are shorter, resulting in lower inventories and lower inventory-related costs. Once the many benefits of outsourcing are realized, the new challenge becomes finding a reliable and experienced manufacturer capable of maximizing these advantages.
One such case of outsourcing producing positive results occurred when Raytheon Company, a Massachusetts-based leader in defense, government and commercial electronics, divested their most complex hybrid circuits to Mass Microelectronics, a design/development firm who would then outsource the actual production of the hybrids. Raytheon has maintained an intense commitment to innovation and quality for nearly 80 years, making them the current leader in the development of defense technologies. So, when it came time to divest their most complex hybrid circuits to Mass Microelectronics, both companies knew that the company who eventually produced the parts would have to possess the same commitments.
While not a manufacturer, Mass Microelectronics serves as a high-end supplier and would provide the circuits to Raytheon. Raytheon, who formerly manufactured the hybrid circuits in their Quincy, Massachusetts and Tucson, Arizona facilities, uses the hybrids in their Patriot missiles, RAMs, Sidewinders, Sparrows, J-Stars, Stingers, Hawks, Mavericks, and Standard missiles. At this time, Raytheon also divested production of F-15 and F/A-18 radar hybrids to Mass Microelectronics. Due to the complex nature of the product line and to ensure that their long-term requirements were met, Raytheon formed a very close relationship with Mass Microelectronics, including the right to approve any manufacturer chosen for the actual production of these circuits.
In searching for a manufacturer for the hybrids, Mass Microelectronics had many factors to consider. The hybrids that had been divested included well over 100 circuit types, with high volumes needed for several of them. In addition, Raytheon continued to require timely delivery of the circuits for their own production. The manufacturer chosen for production would not only have to meet Raytheon’s high quality standards, they would also need to be able to produce high volumes at a rate that would not interrupt Raytheon’s production schedule, even in the midst of equipment transfers between locations.
After researching the market, Natel Engineering of Chatsworth, California was chosen as the major supplier. Natel offered both a history in military manufacturing and a highly sophisticated automated process. Raytheon and Mass Microelectronics felt that Natel would be able to meet the challenging schedule with top-level service and high quality.
Natel Engineering is a contract manufacturer of MCM, COB, and Hybrids with a proven reputation for manufacturing expertise, quality, and innovation. Able to offer more than just an end product, Natel provides value-added services throughout the production process with advanced manufacturing capabilities and industry expertise.
Natel operates under AS9100 certification and is certified to MIL-PRF-38534. To support their commitment to quality, Natel follows the mission statement of “IQS” (Innovation of products and processes, Quality in all their activities, and Customer Service that sets the Standard of Excellence). It was clear to Raytheon and Mass Microelectronics that Natel held the high production standards that were necessary for manufacturing these critical hybrid circuits, and that they would be able to meet the intense production schedule.
The relationship between Raytheon, Mass Microelectronics, and Natel began with Mass Microelectronics overseeing the transfer of Raytheon’s key manufacturing and testing equipment from the former manufacturing facilities on the East Coast to Natel’s fully-certified hybrid manufacturing facilities in Chatsworth and Simi Valley, California. In moving the equipment, which occurred in a series of stages, Mass Microelectronics provided timely delivery, expert handling, and efficient management, which greatly facilitated the transfer process. The transfer took place over a period of three months, and included not only the moving of strategic equipment, but also user training and calibration of the machines.
As part of the transfer, Raytheon’s equipment was integrated with Natel’s established systems and equipment. Natel analyzed the systems, made any necessary upgrades or modifications, and then, depending on the manufacturing stage being performed, selected the best equipment for each process. For example, Natel used Raytheon’s test equipment for testing, thus ensuring maximum quality control of the end product. However, for assembly, several processes were automated using Natel’s automatic lines. By adding automation to the manufacturing process, Natel was immediately able to achieve greater lot-to-lot consistency. It is important to note that the new level of lot-to-lot repeatability is only achieved through automation. In addition, automation provides greater efficiency, reducing production time and allowing for faster time-to-market and lower inventory.
Another key part of the transfer was “gold unit testing”. Before the test equipment was disconnected at the Raytheon facility, “gold
unit testing” was performed. After testing was complete, the equipment was packed and moved to the Natel facility, where it was then unpacked and reconnected.
Before manufacturing began at Natel, “gold unit testing” was performed again to ensure that the test equipment was calibrated properly and functioning exactly as it had before leaving the Raytheon facility. Other product qualification measures were taken to ensure that the current production standards remained as high as they had been prior to the equipment’s transfer. All of this was done efficiently and in conjunction with the appropriate Raytheon Technical Support Staff, resulting in minimal disruption to the production schedule.
From the start, Raytheon was pleased with Natel’s ability to meet their stringent schedules, especially given the fact that Raytheon had continued their production schedule when they divested the products to Mass Microelectronics, and this schedule remained in effect during the transfer of equipment. Natel’s reputation as an experienced and reliable manufacturer held true once they began producing the circuits.
“In order to meet our schedule and cost objectives, the manufacturer of these circuits had to maintain the schedule in the midst of a complex transition of a large number of hybrids in the middle of production. And, Natel did it,” remarked Dennis Mello, Raytheon’s Northeast Supply Chain Manager.
In addition, because Natel’s main focus is manufacturing, they were able to give each product line their full attention, thus assuring both Raytheon and Mass Microelectronics of the end product’s quality, while allowing each of these companies to spend more time focusing on their own core business. “We greatly appreciate the outstanding support and dedicated efforts of Natel,” said Jessie Huebsch, the lead member of Raytheon’s Integrated Product Team. Huebsch went on to say, “Natel’s experience and contacts in the microelectronics industry were invaluable in helping us bring material into our shop in record time to meet our critical program needs.” By transferring the manufacturing of the hybrid circuits to Natel, Mass Microelectronics and Raytheon were able to maintain their tight production schedules with complete confidence in Natel’s staff, which included highly trained manufacturing experts and skilled engineers, and their process, which was the result of over 25 years of microelectronic manufacturing experience in the military and aerospace industries.
Mello stated, “What Natel did was very challenging. They had to prove themselves in the midst of production, and they delivered the products on time.”
Since assuming the role of supplier, Natel has more than exceeded Mass Microelectronics’ and Raytheon’s expectations, earning them Raytheon’s Supplier Excellence Award Certificate of Appreciation for their outstanding work on the hybrids used for F-15 and F/A-18 radar programs. When presenting the award, Raytheon’s Sub-Contract Manager, Ken Duimstra, stated, “At every turn, Natel has been willing to expend resources to accommodate our needs. It is for this reason we were proud to present to them this recognition.”
When companies like Raytheon and Mass Microelectronics are willing to break from traditional means of production and seek alternative methods, the rewards are many. As Natel showed, with their ability to ramp up and meet demanding production schedules without skipping a beat, an outside manufacturer can provide excellent service and quality. And, as long as companies like Natel are using their expertise to produce highest quality products in the least amount of time, allowing contractors to focus on their own core competencies, then the practice of outsourcing will continue to be successful. As Marty Harrison, Raytheon’s Senior Program Manager (Stinger Production Operations), remarked, “With their willingness to go the extra mile to meet our needs, Natel has proven the value of a high-quality, experienced outside manufacturer.”
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