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Quarterly Bulletin
 
Outsourcing development with full product responsibility
 
 

The medical technology company was founded fifteen years ago and over the years a world class competence has been built up. Competition is still fierce and other companies strive to win over the market share that has been gained from efforts invested during nearly two decades. 

 
The last five years the medical technology company has focused its efforts and investments on the core competence. The product portfolio has been streamlined and today consists of fewer items. Today's products have high technical content and are contributing financially with large margins.
 
The development of more and more complex algorithms require increased performance. The ARM based embedded computer currently in use was developed in-house and has become a performance bottleneck. 
 
The following scenario takes its inspiration from real life and our customer's actual problems, possibilities, Hectronic's suggestions on a solution and the benefits thereby arising for the customer. The purpose of the text is to inspire you to see new possibilities for your business using the benefits with Hectronic's business model.
 

Increasing performance in future products

The development engineers suggest that they develop a new embedded computer based on a more powerful X86 processor platform and touch display technology in order to take the next step in product evolution. They argue that future customers expect not only products based on the latest achievements in medical technology but also products that offer a modern Human-Machine Interface.

 

The Purchasing Director agrees on the need for increased performance in future products but questions the idea to keep development of the new embedded computer in-house. Quality problems in manufacturing were still fresh in his memory and he feared that more problems should arise if the responsibilities of in-house development and outsourced manufacturing were kept within the company when shifting to the more complex X86 processor.

 

Quality problems in production

The quality problems in the Purchasing Director's mind started with a suggestion from a visiting component supplier. DC/DC converters at a lower cost were offered. The datasheet indicated that these new converters were similar to the ones used in the design and in production. Functionality was verified by soldering the new DC/DC converters onto a couple of existing boards.

 

Not until the serial production process the weaknesses of the components were revealed and the manufactured boards malfunctioned. The manufacturer meant that the problems were due to bad components but the component supplier said that datasheet was applicable and correct.

 

The problems came as a surprise since the production quality of the ARM computer board was flawless for many years even though, once in a while, components went end-of-life and had to be replaced in the design and in production. The procedures replacing one component with another were carried out without problems up until the decision to replace the existing DC/DC converter.

 

Increased focus on core competence

The above described problems had made quite an impression on the Purchasing Director. He wanted to avoid future problems by using internal development resources differently. His suggestion was to outsource development to experts on X86 processor platforms and allocate more internal development resources to work with the medical technology that had proved successful this far. He argued that it's the most logical step and that it would be a way to continue the strategy to focus on the core competence of the company.

 

Hectronic was one of the potential technical partners with the sought-after experience from development of X86-based industrial computers. The design solution suggested by Hectronic had been discussed earlier in the medical technology company. It was a partly customized solution based on a ready-made CPU module mounted on a tailor-made carrier board with all the features unique to the technology offered by the medical technology company.

 

Objections based on prior experiences

In the internal discussions, prior to the meeting with Hectronic, the development engineers suggested to buy the CPU module from one supplier, the touch display from another supplier and to develop the carrier board and to integrate the system in-house.

 

The Purchasing Director always objected by referring to the problems that had occurred with the DC/DC converters. He wasn't pleased by the fact that the suggestion meant shared product responsibility between two suppliers and his own company. He wasn't particularly keen on managing the manufacturing of the carrier board himself either.

 

Hectronic's set-up to accomplish a similar semi-custom design in production was presented and his mood shifted when he realized that Hectronic offered to take the full product responsibility. The business deal was closed. Hectronic developed the carrier board to match the requirements in the medical technology products and put the board in production.

 

Hectronic supplied the medical technology company with units consisting of one carrier board with the CPU module (Hectronic's own product) mounted and a touch display supplied by one of Hectronic's suppliers. The OS image was loaded and the system fully tested prior to shipping. The medical technology company bought units including CPU module, carrier board, touch display and operating system from Hectronic at a price negotiated for the first 5000 units.

 

Buying production or buying products

The Purchasing Director was satisfied and meant that he had learnt from his own experience about the difference between buying the manufacturing of embedded computers and buying the actual units. The fact that Hectronic single-handedly developed, integrated the parts into a system, put it into production and maintained the design ensures quality. It's about having one point of contact and one technical partner with the full product responsibility and access to all design and production documents for the system.
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