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Improve manufacturing margins by reducing test cost

Test is necessary but wasteful because it adds no value to the product. In today’s world of tight manufacturing margins circuit board test is an ideal cost reduction target.  Yet, many OEMs and contract manufacturers (CMs) continue to generate unnecessary cost—and reduce their margins—by continuing to put every test job on their expensive ‘big iron’ in circuit testers with their high fixturing, programming and support costs.

CheckSum estimates that by sticking with traditional ‘big iron’ ICTs instead of investing in Low Cost ICT, OEMs and CMs unnecessarily spend more than $250 million per year in additional test cost.  In a world where every margin dollar makes a difference, reducing that unnecessary cost is an ideal way to improve the manufacturing bottom line.

The example at right illustrates how a contract manufacturer with 5% gross margins can add 40 basis points to its gross margin—an 8% improvement—by reducing circuit board test costs by just 10%.  One Tier 1 manufacturer found that it could reduce in circuit test cost by 60%. Even if ICT cost represents just half of total board test cost, that’s a 30% cost reduction.

CMs who have recognized and seized this cost reduction opportunity are enjoying both increased operating margins and competitive advantage.  OEMs who recognize that test costs can be reduced are well positioned to negotiate lower overall prices from their CM.

3 steps to reduce board test cost

  1. Senior managers at both CMs and OEMs recognize that board test is not a sacrosanct activity that cannot be tampered with because of groundless fears it might adversely impact product quality and reliability. Rather they should view it a viable cost-reduction opportunity.
  2. Manufacturing and test managers must understand the sources of existing test cost. The most critical aspect of understanding is, “know thy fault spectrum.” A Test Cost Comparison Model available from CheckSum is a helpful tool to organize and speed the cost analysis process.
  3. Understand the impact of the shifted fault spectrum on in circuit test and deploy test jobs to testers with expensive-to-use features like digital vector test only when the capability is actually needed. Tester Portfolio Management is the sensible strategy to ensure maximum test effectiveness at minimum test cost.
Improve Gross Margin