Alec Schibanoff looks at how Acme Electric Corporation’s Electronics Division transformed electronics manufacturing.
Much has been written in the last few years about reengineering, but Acme Electric Corporation’s Electronics Division has truly undergone a significant transformation in just the last year. From a division that manufactured custom proprietary power systems for over 50 years, Acme’s Electronics Division has re-invented itself, changing its direction, how it operates, who its customers are and the services and products it offers.
The key to this transformation was the creation by the division of a new business model, DEM (Design, Engineering and Manufacturing Fulfillment). DEM gives manufacturers of electrical and electronic products the ability to bring products to market faster and to substantially reduce – or possibly even eliminate – their new product development costs in the areas of analog and mechanical design and other allied engineering disciplines.
DEM is the outsourcing of part or all of a business’ new product development, engineering and manufacturing. Just as businesses outsource their payroll, security, advertising and other services, businesses are increasingly defining what their core competencies are. If their core competencies are intellectual property and marketing, it makes sense to outsource all non-core competency functions. And that could include the actual design, engineering and manufacturing of the company’s products.
Design, Engineering, and Manufacturing Programs Acme Electronics provides two types of DEM programs – HLA (Higher Level Assembly) and FAT (Final Assembly and Testing).
• HLA is the design, manufacture and testing of subsystems that become part of the complete system.
• FAT is the design, manufacturing and testing of a complete, finished, ready-to- ship product and also includes logistics and after- sale service.
Dan Corwin, a 28-year veteran and previous CFO of Acme Electric Corporation, was assigned to the Electronics Division as general manager in 1997. Early on, it was apparent that the division could no longer earn the necessary returns in the power supply business. “Power supplies have become a commodity,” observes Corwin, “sold on a cents-per-watt basis. Acme Electronics clearly needed to better utilize its considerable engineering and manufacturing talent and expertise to develop complete systems. Fewer and fewer power supplies are manufactured in the U.S.”
Because the division already had a strong engineering function and state-of-the-art manufacturing, DEM was a natural conclusion. For certain projects, the division may add other engineering disciplines to go along with its mechanical analog abilities, which include electrical, mechanical, thermal, EMI, safety, industrial, test and quality engineering. Roughly two- thirds of the division’s professional staff are engineers or technicians.
The Division was one of the first to be ISO-9001 certified in 1991. It uses Demand Flow Technology (DFT) as its primary manufacturing philosophy and was the first to be certified in DFT. The complete suite of Oracle operating systems was installed concurrently with DFT.
Partnering with Manufacturers and Vendors
Acme Electronics is based in Cuba, N.Y., in the state’s Southern Tier, located between the Finger Lakes and the Pennsylvania border. Just off Route 17 that will soon become Interstate 86), Cuba is only a few hours by car or truck from Boston, New York, Philadelphia, Pittsburgh and Cleveland. Acme Electronics’ modern, 100,000-square-foot facility almost looks out of place in a section of the country that is dominated by rolling hills, dairy farms and silos. For example, the other large employer in town is the Empire Cheese Company.
From their rural surroundings, Acme Electronics supplies state-of-the-art new product development, cutting-edge design and engineering, and sophisticated manufacturing and testing services to the highest technology sectors of the economy: telecommunications, data storage, networking gear and medical electronics.
In addition to the Electronics Division’s facility in Upstate New York, Acme Electric Corporation has plants in North Carolina, Arizona and Mexico, and Acme Electronics has a global network of vendors and manufacturing partners.
“When the division takes on a program,” according to Corwin, “we initially manufacture all the product in Upstate New York.”
Many programs are low volume, and each unit sells for $10,000 and above; those products are built 100 percent in New York for the life of the program. This is especially true in the medical market. Programs with very large volumes will be 100 percent built in New York during the embryonic and growth stage. Most of these programs follow a variation of Moore’s Law and are continually changing. Therefore, 10 percent to 20 percent of the program is continually built in New York, and the remainder is sourced according to cost and the Original Equipment Manufacturer’s (OEM) geographic market preference. However, Cuba remains the control point because of continual change.
Meeting a World-Class Standard
One of Acme Electronics’ current Higher Level Assembly projects is the design, engineering and manufacturing of a critical subassembly for a leading supplier of medical diagnostic equipment. While the OEM focuses on the front end of the product (the part that touches the patient and includes the OEM’s core competency), Acme is developing the back end of products. This includes back planes to support the digital boards, FETs and IGBT modules, wiring of the assembly and a cooling system, as well as the chassis and enclosure that houses all the components. Acme has its own metal fabrication, cabling and board assembly. Acme will manufacture and test the complete assembly, then ship it to the OEM, who will incorporate it into the finished product.
Acme Electronics was able to help the OEM meet a critical Time-to-Market for this sophisticated product. Acme and its OEM partner were able to work in parallel. Acme designed and engineered this critical sub-system, while the OEM concurrently worked on the front end of the product. Some of Acme’s OEM partners are start-up companies. Acme currently is working on a FAT project that involves a highly sophisticated storage device for the telecommunications industry. Acme’s partners are often venture-capital-funded companies that have developed a powerful new concept in the data storage or telecommunications markets. This particular company came to Acme Electronics with an idea. “This is when DEM be-comes a ‘napkin to customer’ turnkey process,” comments Corwin. “The company has a brilliant concept. We will help them turn that idea into a finished product they can ship to customers.”
Time-to-Market is Critical
Since Acme Electronics’ partner is often a new company with no existing products and no revenue stream, it must stretch every dollar it has. So, Acme Electronics and their partner will work in parallel: Acme will do the design and engineering of the hardware, while the start-up focuses on the software.
Acme Electronics’ expertise extends to testing, an increasingly important issue today. Every electrical or electronic product has to pass tests to insure electro-magnetic compliance. Acme has its own EMC Lab.
Also, since Acme Electric’s Electronics Division is ISO-9001 certified, products designed by Acme Electronics meet this world-class standard. In addition, products marketed in Europe need to have the CE mark, and Acme Electronics can provide that certification as well as all domestic agencies.“It’s exciting to be part of a new concept in the product development-engineering-manufacturing continuum,” says Corwin. “As the world gets smaller and the pace of innovation accelerates, we help our partners get new products to market faster. We have the ability to make reality out of product ideas that might have never made if off the napkin.”
Many people, Corwin suggests, ask how Acme is different from a contract electronics manufacturer. The difference is in the point at which Acme engages the customer, and that is significant. Acme Electronics catches the program when it is still an idea or concept and provides the development engineering. Acme considers the engineering continuum to start with design and continue through industrial and test engineering as one process, which should yield the most cost-effective product.
Acme Electronics also stays with the entire life cycle of the program to include design change and end-of-life service, since 70 percent of Acme’s professional staff are technical people. “Our future investment,” Corwin summarizes, “will be in unique engineering disciplines while maintaining state-of-the-art manufacturing methods.”