Contract manufacturing provides a new production model



Companies that develop technologies for optical networks are beginning to recognize that it makes sense to outsource the manufacturing of their subsystems and other module designs. To be competitive in this market, companies know they must devote resources to the next new product and to their own core strengths in the design, development, and marketing of those products. They realize that they must seek out contract manufacturing companies that specialize in this type of work.

In fact, an entire industry of contract manufacturing has already grown up and matured in the electronics industry. Many of these same semiconductor contract manufacturers, with background in the electronics field, are now rushing into the optics market. But the very nature of optical assembly and manufacturing goes against the automated, high-volume business model of traditional electronic contract manufacturers. Some optical component manufacturers also see opportunities in assembly and manufacturing and are attempting to provide this additional service to their original-equipment manufacturer (OEM) customers such as Lucent Technologies, ONI Systems, Ciena, Cisco Systems, or Sycamore Networks.0601wpersp1

Questions still remain. Can electronics-based manufacturers fully bridge the gap into optics? Can a brand-loyal component manufacturer truly have the best interests of the customer in mind, particularly when it is involved at the design stage? And how does any manufacturing partner assure a client of proprietary design protection? To succeed, the challenge is to create an all-new business model that provides proper levels of support to the OEMs for the assembly and manufacturing of optical modules and subsystems, while protecting proprietary design innovations. While telecom OEM network-system developers would be the primary users of these solutions, component developers and others allied to this field are also looking to outsource their manufacturing. They all face the same concerns about balancing design issues, achieving rapid manufacturing, and guaranteeing proprietary design protection in the process.

There's one small, yet consequential, hurdle to entering this new business model: what kind of partner can OEMs, component developers, and others rely on to do this job properly? First and foremost, there must be a firm foundation of key, capable personnel with solid knowledge of both optical integration and manufacturing. Equally important prerequisites include an infrastructure of the latest, most advanced equipment for both manufacturing and testing (see "Questions to ask a potential manufacturing partner," p. 32).

The manufacturing partner must develop and control processes that enable high-volume cost-effectiveness and quality output. Design engineering services that support new product introductions from prototype to production must be in place. Optimal service includes an information system infrastructure that enables virtual manufacturing—a real-time, interactive system, including conferencing, private-network data acquisition, and CAD modeling that unifies all the manufacturing participants.

These OEMs and others are looking for a manufacturing partner that can handle every aspect of manufacturing, provide solutions, and, in effect, become an extension of their own manufacturing process—freeing them from concerns about product delivery, quality, or the sharing of proprietary information (see table, this page).

Ideally, the partnership begins at the concept stage. Very early involvement in the conceptual and prototype stages makes it feasible for the manufacturing-partner contributions to facilitate the engineering of a particular design and help establish the prototype, development, pilot manufacturing, and, eventually, full-scale production.0601perps2

Along with process stability and expertise in process and testing technology, such engineering allows the shortest possible time to achieve desired production volume, thereby reaching markets in both cost-effective and measured ways. In addition, valuable input into the next generation of products from a manufacturing point of view helps the customer achieve optimum cost advantages, high-volume outputs, and superior product performance in the long term.

Providing seamless prototype-to-volume production of optical subsystems demands processes that utilize the latest equipment combined with proprietary optical processes. In other words, it requires more than simply acquiring a piece of equipment to perform a particular function. Virtually all subsystem requirements are custom-tailored to specific outputs and functions. The manufacturing partner's knowledge of precisely the right equipment to accommodate manufacturing of a specific subsystem or module will not only expedite the outcome but also ensure the quality desired by the customer.

To optimize a splice or the use of a particular piece of equipment, expertise and application knowledge are essential. In some cases, certain types of test platforms and equipment must communicate with one another, and considerable tweaking, tuning, and design work is necessary to accomplish this goal.

For instance, a specific test platform that performs a number of different functions custom-tailored to the consumer's required optical parameters is not likely to be readily available off the shelf. What is available, however, is a bank of systems designed for specific functions, such as component testing.

Custom building and manufacturing of optical subassemblies requires the ability to test a variety of product lines, often in volume. Those cases call for specially developed software and test systems custom-configured for automated volume testing. For example, it may be necessary to test a breadth of optical parameters at various temperatures, including temperature cycling, but this type of highly specialized test equipment is rarely available in the marketplace. The challenge comes down to matching and enhancing the most advanced equipment with the right proprietary processes. Very few companies have the depth of knowledge to be able to do this efficiently (see table, p. 30).

There is no single tool that provides virtual manufacturing capability; it has to be built from the ground up. Various means, such as a T1 line and other currently available Internet solutions, can be used to create web-based, web-enabled virtual private networks that allow real-time data acquisition. Firewalls, security measures, and protective measures—such as password constraints—are absolute necessities.

Electronic links also enable procurement, manufacturing, or test data to be integrated with the customer's enterprise-resource planning (ERP) and manufacturing-systems databases. By accommodating each customer's own ERP methods, procurement, testing, and delivery into the service offering, virtual manufacturing links the two floors, effectively turning the outsourcing partner into a direct extension of the OEM.

For example, ONI Systems is a customer of iPhotonics in a state-of-the-art virtual manufacturing relationship. (ONI develops, markets and sells all-optical communications networking equipment for metro-area and regional networks.) ONI's director of manufacturing/test engineering reports that videoconferencing makes it possible for anyone in any office to debug problems in the assembly process. The virtual manufacturing system enables a product to be viewed in different stages by multiple personnel to determine how it is behaving at a specific moment.

Direct extension also means that each partner can dial into the other's site in real time. As one tests circuit packs on the floor, data realized from those circuit packs can be transmitted directly back to the other. Yield analysis can also be performed and managed in real time, both by the customer and its outsourcing partner. The customer can click on a circuit pack and learn which tests have been and currently are being performed, and—in the event of a failure—why it failed.

This feature provides more time to react during the preliminary testing stages, not when the product is already leaving the loading dock. Also, it frees up the customer's shop floor and testing stations to work on and bring new product lines to market.

In reality, geography is no longer a factor. Instead, it's simply a question of communicating and openly sharing data and processes in support of each client's expectations. Therein lies the reason why OEMs, component developers, and others looking to outsource manufacturing can use this new business model with confidence and know that their proprietary designs won't be jeopardized. Partners can't openly share data and processes and support each other without complete trust in the relationship.

Design teams are assigned to each project and manufacturing is done in separate areas. The manufacturing partner must have a high degree of integrity and recognize that only internal company processes may be applied without infringing over any customer-specific process or design specifics. Material and workflows are controlled with precision and segregation.

Of course, it's one thing for a manufacturing partner to be totally connected to its customers. But that doesn't mean anything unless the right people are on the manufacturing side. Manufacturing partners must retain people who are fully trained in fiber management and handling, who understand testing and engineering, and who have the ability to provide feedback on "your assembly unit" as it moves from prototype to production. Anyone can follow instructions and assemble components. But not everyone can test, troubleshoot, and provide feedback with solid manufacturing engineering support.

Every employee must have a voice in contributing to solutions that support customers with rapid, targeted responses. A proactive company culture encourages looking beyond the initial assembly instructions, to creating and articulating solutions that enable more efficient and reliable results. The manufacturing partner shouldn't wait for the customer to come up with suggestions; it should be proactive in anticipating issues and providing solutions.

In this environment, a beneficial relationship involves a great deal of sustaining engineering. Going beyond that, depth of knowledge is also important, as this facilitates an accurate view and understanding of where the client is currently positioned in the market—and where it desires to be. To offer meaningful suggestions to the OEM or component developer, the manufacturing partner must not only understand the current product line, but also have keen insight and the ability to project what the next generation of products will require from a manufacturing and testing point of view. In that sense, the customer's success factor will indeed be tied heavily to that of its chosen partner.

The trend toward outsourcing optical-component manufacturing continues to grow and prompts more and more companies, both established and startup, to look at this business as an opportunity. But it also should raise a flag to anyone looking to outsource manufacturing. The reason companies are outsourcing their manufacturing in the first place is that it's not in their realm of experience and they want to partner with someone who is in that realm.

Compatible corporate cultures and business models, along with the mutual desire for a long-term commitment, can provide a solid foundation for outsourcing relationships. This alliance allows the "outsourcers" to focus on their core competencies—R&D, product design, and marketing—rather than on manufacturing.

Moez Adatia is co-founder and vice president, sales and marketing, of iPhotonics, 799 Cromwell Park Dr., Glen Burnie, MD 21061. He can be reached at 410-590-0320 or


Questions to ask a potential manufacturing partner
You're a leading telecommunications firm and you are considering outsourcing some of your optical module or subsystem manufacturing. Or you're a company that has a need for manufacturing that you do not wish to perform in-house. What questions should you ask your potential manufacturing partners to determine if they can support you properly? Here are a few suggestions.

What are your core competencies? If manufacturing isn't one of them, reconsider.

What is your involvement in fiberoptic assembly? Are you currently doing this for anyone? If they aren't, forget it. You don't want to spend time and resources on training them.

What types of fibers do you work with? Make sure they can handle yours.

What level of test complexity can you perform? Testing is key to quality control and volume production.

Do you have any design capabilities? If not, how will they interface with your design-engineering group and help with design for manufacturability and testability?

What system/software do you use to manage materials, orders, process flow, etc.? This will give you a good indication of their sophistication and capabilities for volume production.

What is your capacity? Make sure they fit your volume production needs.

What is your optical experience? Optical is different than electrical, and optical experience is important.

What relationships do you have with optical vendors? Component availability and costs are critical.

What engineering capabilities do you have? Engineering the manufacturing and testing processes assures best practices.

Can you perform optical integration? This is a great complement to assembly and manufacturing.

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