The future of contract manufacturing

Throughout the COVID-19 pandemic, many Canadian contract electronic manufacturers (CEM) have and continue to play an important role in rapidly producing technology and equipment critical to fighting COVID-19, from ventilators and electronic dispensers for hand sanitizers and soaps, to remote temperature monitors, electronic door controls for limiting access to areas and more.

As Canada re-opens from the COVID-19 quarantine, and many sectors shift to moving innovation beyond the pandemic, contract manufacturers are ramping up while seeking ways to continuing to improve efficiency and reduce costs. Most Canadian CEMs are very upbeat, anticipating that the next few years will be busy.

No perfect forecast from end-customers

The big challenge that CEMs face today is that there is no perfect forecast from end-customers. Many contract manufacturers are challenged with short or no lead-time orders from their end-customers, so the need to quickly find product in stock is critical. That side of the industry is growing, as new and existing customers develop innovative products. An example of this trend is the large growth of new customers and technology in the Waterloo/ Kitchener area in southwestern Ontario.

What we see is further creation of services and capability in serving small to mid-size end customers which have short time to market needs with high mix, lower volume requirements. Some have created separate dedicated facilities for meeting those needs, some adding to their current structure, or investing in new, larger facilities with those services all under one roof.

In order to turn product quickly or when forecasts change, contract manufacturers need to be nimble and adapt quickly. Creating a solid supply chain with dependable partners is critical to contract manufacturers’ ability to quickly administer to their customers’ needs and keep their business.

For example, more than 400 contract manufacturing-related businesses across Canada work directly with Digi-Key, tapping into its broad inventory position. Digi-Key’s newer digital tools acquire the product quickly and efficiently – reliably delivering a broad selection of products (10.2-million products globally) and high levels of inventory (2.2-million in stock and available for immediate shipment within 24-hours to Canada) along with continuity, consistency.

Contract manufacturers remain in a unique position, as they support a variety of end-customers of all sizes, different industries, technologies and varying product and production complexities. Digi-Key’s contract manufacturing customers continue to innovate and leverage digital transformation to get ahead of these challenges and drive continued success. Here are just some examples:

Production area of quick-turn specialists Microart Services in Toronto. Source: Microart

Microart

Based in Toronto, Microart is a leading quick-turn contract manufacturer with nearly 40 years of experience. Led by CEO Mark Wood, Microart employs 300 people in a new 42,000-square-foot facility, focusing on building pcb assemblies. The firm specializes in small companies looking for quick-turn to yearly builds to forecast, but the key for Microart is taking on business that was not forecasted. In any given month, they serve about 300 different customers and build about 1,100 unique boards. As the pandemic spread around the world, Microart increased production of pcbs for use in contactless Purell equipment that automatically dispenses hand sanitizer.

Microart remains in the midst of a digital transformation, adapting to future demands along with increased efficiency and cost savings. Behind the scenes, Microart has implemented Digi-Key’s API solutions to improve speed, efficiency and accuracy, as well as reduce costs in receiving pricing and availability. The faster Microart can receive accurate pricing and availability from its supply chain partners, the faster they can turn an estimate around and secure new business.

To improve overall efficiency Microart has implemented two new technologies on its production floor:

• X-ray counters dramatically speed up de-kitting from the floor and ensure all components returned to stock are accurately counted. This also translates to more efficiency on the production floor as shortages are exponentially reduced.
• Smart carts: Common parts are now stored on the production floor and can be retrieved without having to access the inventory area. All parts taken are scanned out and scanned in on return for full traceability.
  

  Family-owned Digico in Montreal has more than 4-0-years of CEM experience. Source: Digico

Digico

A family-owned contract manufacturer based in Montreal, Digico has more than 40 years of experience specializing in the manufacturing of complex electronic material including printed circuits, cables and harnesses, coating, testing according to customer specifications and electromechanical integration. Led by President Jacques-Étienne Côté, Digico specializes in new product introduction (NPI) builds — a key focus for start-up companies, as well as established companies looking for fast entry into the market. Digico partners with many medical end-users, and it is the first Canadian manufacturer of electronic products to receive an ISO 13485: 2003 certification related to the medical field. As an industry leader, Digico has invested in digital technology to connect and automate its ecosystem. The firm’s investment in technology and certifications also drives full traceability of each item produced, which is critical in the medical device, security and automotive industries. Digico’s strong set-up process prior to production is key to driving efficiency and cost containment.

Digico values the strong relationships it has built with customers and distribution partners. As Digico’s top supplier, Digi-Key has worked to meet the CEM’s specific needs, from adding key manufacturers to supply chain solutions. Digico’s advanced processes, digital technology, strong team and reliable distribution partners have helped the firm maintain its speed to market, while continuing to build and maintain strong customer relationships.

Production area of Burnaby BC-based CEM Creation Technologies.

Creation Technologies

Creation Technologies is a global product development and electronics manufacturer with three out of 10 locations based in Canada. This global footprint, along with Creation’s global ERP system, customer-focused teams, multiple levels of engineering support, supply chain management and A&D experience set Creation apart from other contract manufacturers. The team is always striving to improve efficiency with its lean journey through digital technologies, and the firm’s Canadian footprint allows close proximity to major U.S. cities on the east and west coasts, where many clients are based. The firm strives to provide the best total solutions, and lifetime partnerships with its customers.

Over the years, Creation has been active with key acquisitions allowing them to bring local support to many major markets in North America. Digi-Key has received preferred status as a supplier to Creation in supporting their end customers with new design and product development in the firm’s growing technical support area, NPI phases and vast prototype to production capabilities with a large array of certifications. Digi-Key also actively supports Creation’s online supplier portal that drives quick component status for end-customers.

Whether CEMs specialize in quick-turn NPI, established products with annual volume, or both, it’s important to have component distribution partners and to set up supply chain programs which provide reliability and scalability. Digital transformation is no longer an option – it has become a necessity in a world where both financial budgets and available human resources continue to shrink. The future is bright for contract manufacturers who are embracing new technology and making the digital transformation shift.

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Paul Dosser, VP business development at Digi-Key.

Paul Dosser is vice-president of business development at Digi-Key Electronics, one of the world’s largest, full-service distributors of electronics components. https://www.digikey.ca