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The Future of SMT: Welcome to the 4th Dimension

In the coming year, significant gains can be made through the understanding and acceptance of how market-delivery demand patterns are changing. Some entrepreneurs are already making serious money taking advantage of weaknesses in legacy distribution systems and traditional business shortcomings. A revolution in PCB-based electronics manufacturing is about to happen, driven by the same underlying principles behind the more general Industry 4.0 innovation currently discussed in Germany. This will act not only to drive a new wave of manufacturing competitiveness in the market, but will also bring home production traditionally regarded as being more cost-effective from countries with lower labor costs. The catalyst for these changes lies in the 4th dimension.

Time is generally regarded as being the 4th dimension. We are all time-travelers in a sense, travelling at roughly the same speed. Those who spend excessive hours flying around the globe may be slowing by an odd micro-second, but it is hardly significant; it seems only Superman gets the breaks.

If Superman actually existed, he could do worse than to start a new career in distribution. The manufacturing cost of goods made, for example in China, is a mere fraction of the price paid at retail. Taking out the costs of design, sales, marketing, and management overheads, a very large part of the price per unit goes into the distribution of the product, from the door of the factory into the hands of the customer. In addition to cost, time to market is a key factor to consider, because products with the latest technology, many of which are being purchased like fashion items, command the highest opportunity for profit margin, but only for short times. The contribution of cost from distribution, including depreciation in the value of products through the long distribution process, has reached the tipping point as compared to base manufacturing costs, assuming company overhead, sales, and marketing costs remain the same.

This is the trigger for the need to look at the next step in manufacturing evolution. As air-freight costs are only going in one direction, and shipping by land or sea simply takes too long, it points us toward the old fundamental principle of “manufacturer close to the market”--reinvented.Read the full column here.Editor's Note: This column originally appeared in the December 2014 issue of SMT Magazine.