Contract manufacturing and outsourcing can lower overhead and increase yields

Aug. 1, 2002
In order to meet our schedule and cost objectives, the manufacturer of these circuits had to maintain the schedule in the midst of a complex transition of a large number of hybrids in the middle of production. And, Natel did it.

"In order to meet our schedule and cost objectives, the manufacturer of these circuits had to maintain the schedule in the midst of a complex transition of a large number of hybrids in the middle of production. And, Natel did it."

by Jim Angeloni

As the economy constantly shifts, contractors continuously seek new and innovative means of manufacturing products. This is particularly true for contractors to the U.S. Department of Defense (DOD), who have felt increasing pressure to minimize costs. To alleviate this pressure, many DOD contractors have turned to outsourcing as an efficient, cost-effective method of producing many of their systems.

Although many DOD contractors already have in-house manufacturing facilities, outsourcing can provide a viable means of lowering manufacturing costs, obtaining higher yields, and improving product quality. For most contractors, reduced production cost serves as the primary advantage of this alternative means of production. Outsourcing allows for significant cost cuts through the reduction of overhead, reduced headcount, and elimination of equipment and software investments.

Outsourcing can also provide many manufacturing advantages. For example, a skilled manufacturer allows contractors to focus on their core businesses with the confidence that experts are producing their products. Other benefits include higher yields due to automation and advanced equipment. Higher product quality comes with better training and improved process repeatability due to upfront process characterization.

Increasing efficiency and eliminating back-office tasks also saves significant amounts of time. Additionally, manufacturing cycle times are shorter, resulting in lower inventories and lower inventory-related costs. Once company leaders realize the many benefits of outsourcing, their new challenge is finding a reliable and experienced manufacturer.

While not a manufacturer, Mass Microelectronics Center in Westborough, Mass., is a supplier and agreed to provide Raytheon with the circuits. Raytheon, which formerly manufactured the hybrid circuits in the company's Quincy, Mass., and Tucson, Ariz., facilities, uses hybrids in the Patriot Sidewinder, Sparrow, Stinger, Hawk, Maverick, and Standard missiles, as well as in the Joint Surveillance Target Attack Radar System (Joint STARS) aircraft. Raytheon also sold production of F-15 and F/A-18 radar hybrids to Mass Microelectronics. Due to the complex nature of the product line and to ensure that their long-term requirements were met, Raytheon formed a very close relationship with Mass Microelectronics, including the right to approve any manufacturer chosen for the actual production of these circuits.

In searching for a manufacturer for the hybrids, Mass Microelectronics had many factors to consider. The hybrids that had been divested included well over 100 circuit types, with high volumes needed for several of them. In addition, Raytheon continued to require timely delivery of the circuits for their own production. The manufacturer chosen for production would not only have to meet Raytheon's high quality standards, they would also need to be able to produce high volumes at a rate that would not interrupt Raytheon's production schedule, even in the midst of equipment transfers between locations.

After researching the market, Natel Engineering Co. of Chatsworth, Calif., was chosen as the major supplier. Natel offered both a history in military manufacturing and a highly sophisticated automated process. Raytheon and Mass Microelectronics officials said they believed that Natel would be able to meet the challenging schedule with top-level service and high quality. Natel Engineering manufacturers multichip modules, chip on board, and hybrids.

Natel operates under ISO 9001 certification and is certified to MIL-PRF-38534. Natel follows "IQS"(innovation of products and processes, quality in all our activities, and customer service. It was clear to Raytheon and Mass Microelectronics that Natel held the high production standards that were necessary for manufacturing these critical hybrid circuits, and that they would be able to meet the intense production schedule.

The relationship between Raytheon, Mass Microelectronics, and Natel began with Mass Microelectronics overseeing the transfer of Raytheon's key manufacturing and testing equipment from the former manufacturing facilities on the East Coast to Natel's fully certified hybrid manufacturing facilities in Chatsworth and Simi Valley, Calif. The transfer took place over three months, and included moving equipment, training users, and calibrating machines.

Experts integrated Raytheon's equipment with Natel's established systems and equipment. Natel analyzed the systems, made necessary upgrades or modifications, and selected the best equipment for each process. For example, Natel used Raytheon's test equipment, thus ensuring maximum quality control of the end product. However, for assembly, several processes were automated using Natel's automatic lines. By adding automation to the manufacturing process, Natel was immediately able to achieve greater lot-to-lot consistency. The new level of lot-to-lot repeatability only comes through automation. In addition, automation adds efficiency, reduces production time enables fast time-to-market, and reduced inventory.

From the start, Raytheon officials say they were pleased with Natel's ability to meet their stringent schedules, especially since Raytheon had continued their production schedule when they divested the products to Mass Microelectronics. This schedule remained in effect during the transfer of equipment. Natel's reputation as an experienced and reliable manufacturer held true once company experts began producing the circuits. "In order to meet our schedule and cost objectives, the manufacturer of these circuits had to maintain the schedule in the midst of a complex transition of a large number of hybrids in the middle of production. And, Natel did it," remarked Dennis Mello, Raytheon's Northeast supply chain manager.

In addition, because Natel's main focus is manufacturing, they were able to give each product line their full attention, thus assuring both Raytheon and Mass Microelectronics of the end product's quality, while allowing each of these companies to spend more time focusing on their own core business. "We greatly appreciate the outstanding support and dedicated efforts of Natel," said Jessie Huebsch, the lead member of Raytheon's Integrated Product Team. Huebsch went on to say, "Natel's experience and contacts in the microelectronics industry were invaluable in helping us bring material into our shop in record time to meet our critical program needs." By transferring the manufacturing of the hybrid circuits to Natel, Mass Microelectronics and Raytheon were able to maintain their tight production schedules with complete confidence in Natel's staff, which included highly trained manufacturing experts and skilled engineers, and their process, which was the result of over 25 years of microelectronic manufacturing experience in the military and aerospace industries.

"What Natel did was very challenging. They had to prove themselves in the midst of production, and they delivered the products on time," Mello says.

Since assuming the role of supplier, Natel has more than exceeded Mass Microelectronics's and Raytheon's expectations, earning them Raytheon's Supplier Excellence Award Certificate of Appreciation for their outstanding work on the hybrids used for F-15 and F/A-18 radar programs. When presenting the award, Raytheon's Sub-Contract Manager, Ken Duimstra, stated, "At every turn, Natel has been willing to expend resources to accommodate our needs. It is for this reason we were proud to present to them this recognition."

When companies like Raytheon and Mass Microelectronics are willing to break from traditional means of production and seek alternative methods, the rewards are many. As Natel showed, with their ability to ramp up and meet demanding production schedules without skipping a beat, an outside manufacturer can provide excellent service and quality. And, as long as companies like Natel are using their expertise to produce highest quality products in the least amount of time, allowing contractors to focus on their own core competencies, then the practice of outsourcing will continue to be successful. As Marty Harrison, Raytheon's Senior Program Manager (Stinger Production Operations), remarked, "With their willingness to go the extra mile to meet our needs, Natel has proven the value of a high-quality, experienced outside manufacturer."

Jim Angeloni is the vice president of manufacturing for Natel Engineering in Chatsworth, Calif. For more information contact Natel by phone at 818-734-6500, by fax at 818-734-6530, by post at 9340 Owensmouth Ave., Chatsworth, Calif. 91311, or on the World Wide Web at

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