SigmaTron Avoids Supply Chain Interruption

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1 Inside this issue: New Quality Director 2 UC Focused on Quality/Efficiency New Box Build Project About SigmaTron International SigmaTron International (NASDAQ:SGMA) is a full service EMS provider with a network of manufacturing facilities in the United States, Mexico, China and Vietnam. We focus on companies who want highly customized service plus a scalable global manufacturing footprint. We serve a diversified set of markets which include: aerospace/defense, appliance, consumer electronics, gaming, fitness, industrial electronics, medical/life sciences, semiconductor, telecommunications and automotive. Our quality certifications include ISO 9001:2008, ISO 13485:2003 and AS9100C. We are also International Traffic in Arms Regulations (ITAR) registered. 3 4 When the labor dispute that impacted the flow of cargo through 29 ports on the U.S. West Coast ended in February, businesses breathed a sigh of relief. Companies depending on timely flow of goods through those ports were experiencing two-tofour week delays. While product shortages were not severe enough for the average consumer to notice it, it did cause some empty shelves and had it continued unabated was likely only a few weeks away from creating widespread shortages of goods imported from Asia. The degree to which companies were impacted was highly dependent on supply chain management strategy and creates First Quarter 2015 Volume 3, Issue 1 SigmaTron Avoids Supply Chain Interruption some lessons learned in common wisdom about optimum raw material and finished goods inventory levels. In SigmaTron International s (Continued on page 5) SigmaTron Supports Multi-Facility Accounts As customers are analyzing the total cost of outsourcing, many find that the proximity of the contractor to either their facility or to the end market contributes to achieving lowest total cost. One of the advantages of SigmaTron s strong North American and Asia manufacturing footprint is the ability to support customers wishing to have their contractor s manufacturing site close to their facility. Additionally, SigmaTron s company-wide systems and unified processes provide the visibility and standardization needed to support customers wishing to use more than one Sigma- Tron facility. For example, a manufacturer of industrial equipment is using SigmaTron s Elk Grove Village, IL and Union City, CA facilities to support their Midwest and West Coast facilities. They are keeping some projects in-house and Above, SigmaTron s purchasing teams, including this group in their Suzhou, China facility, helped successfully address the procurement challenges created by the labor dispute at U.S. West Coast ports. outsourcing a mix of printed circuit board assembly (PCBA) and box build production. In the current arrangement, SigmaTron s Union City facility produces PCBAs and the customer s California facility handles all final assembly. The Elk Grove Village facility is doing a mix of PCBAs and higher level box build, and the customer is doing final assembly on some product in its Chicago facility. Elk Grove Village s box build portion of the project includes environmental stress screening, product reliability and life cycle testing. SigmaTron s standardized systems help its team act as an extension of the customer s manufacturing operations in several ways. The Bills of Materials (BOMs) are entered into Agile as received. This provides visibility (Continued on page 3)

2 Page 2 UC Test Team Helps with DFT Greg Poissant Poissant New Director of Quality at EGV Greg Poissant has joined SigmaTron International s Elk Grove Village (EGV), IL facility as Director of Quality. Previously he served as Director of Quality at TouchSensor Technologies. He was earlier associated with Fellowes Manufacturing and Appliance Controls Technologies in quality management functions. Greg has nearly three decades of quality management experience and has been instrumental in setting up key quality processes and philosophies in all of his previous employers. We see him as a strong addition to our team and integral to our focus in supporting customers with requirements for superior quality, said Jim Barnes, EGV s Vice President of Operations. Greg is a Certified Quality Manager and a Certified Quality Engineer through the American Society for Quality (ASQ). He has served as a Lead Auditor for ISO 9001:2008 and is a Certified Six Sigma Green Belt. He received an Associate of Science degree in industrial electronics technology from Devry University. Design for testability (DFT) is as critical a service as design for manufacturability (DFM), particularly as printed circuit board assemblies (PCBA) shrink in size and become more densely populated. At Sigma- Tron International s Union City, CA facility, the test engineering team frequently helps new customers with DFT as part of the New Product Introduction (NPI) process. We start the NPI process by analyzing test coverage when a customer doesn t have a strong test engineering team and test strategy. We take their computeraided design (CAD) data and enter it into our DFT software to perform the analysis, said Andrew Vo, the Union City Facility s Director of Test Engineering. Common issues found during a DFT analysis include: No termination of a single connection More than one connection to the circuit but no via to access to test Circuitry does not match layout design From a DFT standpoint, best practices include: Each single connection should be terminated either pull up or pull down, depending on the internal integrated circuits (ICs). When terminated correctly the circuit performs better and there is less electrical noise during incircuit test (ICT). Even with multiple connections on the circuits, printed circuit board (PCB) layouts have very poor test accessibility if the PCB layout designer does not provide vias which can be accessed. Unless the product incorporates RF or high speed technology, the PCB designer should bring all multiple connections to test vias that are accessible from the bottom side of the PCBA. When there is a mismatch between circuitry design and the PCB layout, components can heat up or blow up when power is applied to the PCBA. Routinely checking this issue as part of the NPI process, ensures the design can be corrected before this level of damage occurs. The goal of SigmaTron International s NPI test strategy is to screen thoroughly enough to ensure that the circuit designer will be able to power up first articles and test with no short or open circuits. A three-pronged inspection and test strategy is used in that process. Automated Optical Inspection (AOI) is used to verify the placement and polarity of all components on PCBA. X-ray is used to inspect all solder joints. Flying probe or ICT is used to test for short or open circuits, and bad components. The degree to which the PCBA can be tested for shorts/opens depends on the level of accessibility provided by the PCB layout designer. This approach to address issues as early in the NPI process as possible, helps customers avoid production delays and/ or field failures. This is particularly important when companies utilize thirdparty design resources or do not have a high level of in-house manufacturing and test expertise. For example, a start-up company with a new consumer product recently went through an NPI process at SigmaTron. The product did not have good accessibility and SigmaTron International s test engineering team put together a proposal on enhancing the test strategy. Following review of the CAD data, SigmaTron s team met with the customer s PCB layout designer and gave him recommendations for modifications to the layout that included recommendations for test point accessibility and corrections to circuitry routing issues. The team also found that while the boundary scan tool the designer used (Continued on page 4)

3 Page 3 UC Team Focused on Improving Quality and Efficiency Spitfire Controls Gives The SigmaTron International s Union City, California facility routinely looks for ways to enhance quality and efficiency in the products it builds. When possible, the facility s engineering team provides design for manufacturability and testability recommendations but in some case redesign isn t an option. Our focus in optimizing each project is to find ways to work smarter. In some cases, strategic equipment investments that we ve made are helping us address challenging fine pitch technology. In other cases, our manufacturing engineering team is coming up with approaches that eliminate non-value added activity, said Raj Upadhyaya, SigmaTron International s Executive Vice President, West Coast Operations. Multi-Facility (Continued from page 1) The facility s Fuji AIMEX production line supports the superior placement accuracy required by today s small, densely-packed PCBAs. For example, a printed circuit board assembly (PCBA) used in satellites had 0201 components placed too closely together and redesign was not an option. The Union (Continued on page 4) into components/materials usage at both facilities and makes it easier to leverage purchases on the total customer spend. Valor is used for design for manufacturability/testability (DFM/DFT) recommendations. The team at Elk Grove Village did the upfront DFM/DFT recommendations and built prototypes. Then it transferred a portion of that production to Union City. SigmaTron s proprietary SCORE customer portal gives the customer visibility into project status in both facilities. Through SCORE the customer s program team can: Track product through the manufacturing process with order, manufacturing, and shipping status available 24/7 View data real-time to see changes as they happen SigmaTron s systems ensure 24/7 production status visibility both in-plant and via secure web access. View an order notes feature that gives them visibility into any information SigmaTron s team adds See all the details of shipped orders with just one click. We ve created a system that meets our customer s needs for support of two facilities with a level of visibility and ease of product transfer that makes it seem as though they were working with a single factory. They have the cost reduction benefits of proximity to both of their manufacturing sites and none of the downside that can occur with multiple production sites. It is a win-win all around, said Jim Barnes, V.P. Operations at SigmaTron s Elk Grove Village facility.

4 Page 4 TJ Facility Launches New Box Build Project SigmaTron s Tijuana facility was recently awarded a box build project for a consumer product. The project launch process started with the team performing design for manufacturability/testability (DFM/ DFT). There is no room to make mistakes in consumer products and our goal has been to work with the customer in eliminating potential causes of defects in both the design and the production process, said Raj Upadhyaya, SigmaTron International s Executive Vice President, West Coast Operations. The production process utilizes as much automation as possible to minimize variability and handling. The process is designed with a cycle time of one day or less in the factory. System build uses a paced conveyor belt to ensure cycle time goals are achieved. Quality and productivity don t need to be expensive. Our printed circuit board assembly (PCBA) production and test processes are highly automated. The system build process is well defined and simplified to point where only entry level production operators are required. The goal is to provide our customer with competitive cost, a scalable production model that can grow as their demand grows and the superior quality needed to grow market share, added Raj. DFT (Continued from page 2) had not ensured a proper JTAG connection. As a result, no power line was connected to the JTAG. Once the PCBA was re-laidout, the test engineering team rechecked the layout and validated that all issues were corrected. This improved test accessibility from 45 percent to 98 percent. First articles were tested using a combination of ICT, AOI and 5DX X-ray to expand test coverage. The program has successfully ramped and is in volume production. Early identification of the test issues made it easy to have the design respun without significantly impacting the NPI schedule. The earlier our team can get involved, the more options we The will have to optimize test strategy and the faster we can resolve critical issues, Andrew added. Efficiency A test technician checks the results of a flying probe test. Quality/Efficiency (Continued from page 3) City production team was able address this challenge by running it on a line which included Fuji AIMEX equipment. The Fuji AIMEX machines were able to place accurately in spite of the tight spacing and 100% yield was achieved on the project. In another case, a PCBA used in an agri- cultural product was experiencing quality issues when components were placed using Fuji CP5 and IP-III equipment. The project was migrated to a line where larger components were placed using a Fuji CP6 and smaller components were place using the Fuji AIMEX machines. The change in placement strategy also reduced production flow from two lines to one, which reduced handling and transport time. Rework was entirely eliminated. The improvement was so dramatic that the customer actually questioned whether or not we were manipulating the data. Matching PCBA complexity with machine placement accuracy is critical with dense PCBA designs, added Raj.

5 Have a suggestion or article idea? Contact Curtis Campbell, VP Sales, West Coast Operations Phone: curtis.campbell@sigmatronintl.com Supply Chain (Continued from page 1) case, no customer deliveries were expedited nor were air shipments of raw materials or customer products to the U.S. necessary. There was a need for air shipment of some U.S. produced raw materials to Asia. Elements of SigmaTron International s business model supply chain strategy that mitigated the impact of the port slowdown included: Real-time systems visibility that included access to customer demand trends, raw material status, inventory status and production status A practice of maintaining two-to-four weeks of consigned finished goods inventory near major customer facilities Enough trends visibility to be able to increase production to replenish finished goods kanbans as inventory levels started dropping Supply chain support for increased raw materials inventory levels Excellent systems linkage among purchasing teams in Asia and the U.S. Strong relationships with both customers and suppliers that enabled a team approach to addressing challenges created by the slowdown. On average, shipments were slowed down by two-to-four weeks. In some cases, shipments were delayed by as much as five weeks. The initial warning sign that the supply chain management team would need to change ordering patterns to mitigate the impact of the slowdown was a drop in consigned finished goods inventories at larger customer locations. In SigmaTron s case there were three points of supply pipeline impact. First, finished products shipping from its factories in Asia to North American customers via west coast ports were impacted. Second, shipments of material from Asia to its North America factories were impacted. Finally, shipments of raw material or subassemblies from the U.S. to its Asian factories were impacted. In considering alternatives, the team looked at re-routing shipments to alternate ports in Mexico or Canada, or through the Panama Canal. In all evaluated cases, a choice to re-route was either limited by overland transportation options or would add additional cost plus two-to-three weeks to the shipping process, which negated any benefits from re-routing. As a result, the team decided to opt to pull in production and increased inventories of raw materials and finished goods to ensure buffer stock to cover delays. Where possible, the Company s IPO and factory-based purchasing teams identified local, alternate sources for critical materials. While the choice to increase both raw materials and finished goods inventories increased costs during the slowdown, it also prevented missed deliveries and eliminated the need to expedite materials or product via air freight, except in isolated situations. The company-wide systems visibility provided by the combination of iscore and the ERP system enabled the supply chain management team to have real-time visibility into consumption trends related to the added inventory. Systems linkages with customer forecasts provided visibility into future demand trends and systems linkages with suppliers enabled rapid adjustments as forecasts and inventories changed. All that said, the human factor was also key in successfully mitigating impact. Both customers and suppliers were willing to work outside of standard contractual arrangement to address the issues caused by the slowdown. While the word, partner is often used lightly to describe relationships that are anything but partnerships, in this situation true partnerships were in play. Another factor was SigmaTron s relatively lean management organizational structure, which allowed for executive decisions related to changes in business model to be quickly evaluated and approved. Copyright 2015 SigmaTron International, Inc. All Rights Reserved.