It was an improbable scenario. A not-for-profit organization wanted to manufacture a very low-cost, low-margin product in a highly developed country not known for bargain-basement tax rates or wages. In fact, some potential partners in the deal wouldn't even entertain the proposal, saying it simply couldn't be done.
"With the initial production run being something along the lines of 2,000 pieces, the volume wasn't there to make it practical to build in the West," Mike Buffham, global head of electronics design engineers at the UK distributor Premier Farnell plc (London: PFL.L), told us. "It was very frustrating."
The UK inventors of the $35 Raspberry Pi, a computer the size of a credit card, wanted it to be manufactured in the UK. The Pi was meant to stimulate young people's interest in computer programming, so it had to have a very low price. There wasn't a lot of room for profit margin. So the initial run of the product took place in China.
The initial release of the Pi in February was a huge success. Two exclusive distributors, Premier Farnell and RS Components, sold out their supplies within hours. Future demand looked promising, so the inventors, along with executives from Premier Farnell, looked for a UK manufacturing partner. They found one in Sony UK Technology Centre.
It wasn't an automatic win, Buffham said. Sony UKTec, like any other business, has to turn a profit. The partners started with the Pi’s bill of materials (BOM) and broke down the cost of each component. They looked for efficiencies and savings in the sourcing process. In this case, since Premier Farnell distributes both components and end products such as the Pi, it could provide some economies of scale.
"That was the challenge we faced at the end of the day," said Buffham. "These are the parts we need, and here are the prices of those parts. So we had to look at how we could get the landed cost of the Pi where we needed it to be. We spent as much time talking about the shipping of the product as the product itself. We looked at the total cost of acquisition and what [the BOM] would cost anywhere in the world."
Eventually, the partners were able to get the costs in line. Sourcing and shipping efficiencies offset other costs of manufacturing in the UK. Sony UKTec now manufactures the Pi for the Raspberry Pi Foundation. Premier Farnell supplies components and sells the device.
According to Buffham, local manufacturing has its advantages.
For one thing, if there is a problem, it can be addressed and fixed within the same time zone. We can get things done efficiently. But we started with the premise that we would prove it could be done here as cost-effectively as in China. But it had to be profitable for everyone.
The Pi will still be manufactured in China as well as in the UK. Premier Farnell said in a press release:
Sony UKTec will be investing in additional equipment to fulfill the order requirements, providing flexibility and scalability to cater for potential increases in demand. This will include additional automated circuit board equipment and double side reflow machinery. Furthermore, the site will be extending its manufacturing process capability to include a technique called package-on-package (PoP). This process allows the processor and memory to be stacked on top of each other, reducing the PCB footprint and the distance that high-speed signals need to travel, improving overall reliability.
Sony UKTec will add 30 jobs as a result of this effort, Premier Farnell said.
"Pulling this together took a lot of commitment from everybody," Buffham said. "But from day 1, Sony UKTec had a 'can do' attitude. They wanted to do this. And we all wanted to prove a product could be designed and manufactured in the same country."
Regarding your request on can it be marketed in industrial automation, I do not see why it cannot be. There are certain limitations but not impossible at all.
@talex: Yes, they were. That initial run that nobody wanted to deal with was done in China. That also runs counter to the typical manufacturing solution: most prototypes are done in factories close to the OEM so the OEM can work out the bugs. So the prototype was produced in China and the volume production will be split between China and the UK. I agree--very cool
If China is removed from this equation can UK operation can supply product at this attractive price? Or is China operation must for UK operation to depend on for lower cost?
@hm: Right now, the short answer is "no." Even some of the components sourced for the UK production are made in China. I think China still has a big part to play in cost-effective manufacturing, but it is nice to see it doesn't have to be the ONLY player.
It's good to see that China is not the only low cost producer in the world. Even if other countries might still lag behind China, the competition will ensure that Chinese themselves stay on their toes and do not become complacent. This would ensure that efficiency in the production sector continues across the world.
Even some of the components sourced for the UK production are made in China.
@Barbara, thanks for this clarification. This tag is something similar to Google's "Made in USA" tag for Nexus Q. Many people are not aware of the fact that "Made in US" or "Made in UK" doesn't necessarily mean that the product is not using Chinese products. But this marketing strategy definitely helps the companies to attract more buyers.
Barbara, after the made in USA policy by some of the companies, now it's the turn for UK. Whether there is any particular advantage for companies to opt for made in UK products. I mean any special tax treaty or any federal government initiative for promoting native products.
@jacob: good question. There are advantages, as long as the costs work out. For example, the Pi inventors can hop in a car and visit the assembly line if they want to. Any problems with components or supply can be taken care of immediately: with Premier Farnell in the UK, component delivery is significantly easier. It is a pretty complex process to figure out just how much all of this time-savings is worth, but for Sony UKTec it was compelling enough. Some of the Pi's components are still made in China and shipped to the UK. So I guess the lesson is offshore where it makes sense, and onshore when you can.
That's why we discuss "landed cost" of the Pi vs. total cost--landed cost accounts for all the shipping and procurements costs and the physical movement of inventory.
Barbara, I think such advantages can exist only if they limited the operations within the territory of the native country. If they have a plan to go for global operations or in multiple countries, how they customers can avail such advantages. If they want to offer the same advantage, they have to duplicate the same effort in other countries also, which can incur additional expenses and investments.
"And we all wanted to prove a product could be designed and manufactured in the same country"
Such patriotisms are good, but in this globalization era, will it have any advantage. The basic underlined concept of globalization is promoting global business in a pick and stitch manner, irrespective of country or economy. Companies can get done their work at different countries based on resource availability at the best price.
This is a living example and proof that local manufacturing in the West can still be profitable for the right applications. Pi will not only be an inspiration to the young generation of engineers in the UK but it will also inspire entrepreneurs and businesses to rethink outsourcing offshore and to at least consider giving local manufacturing a chance before looking outside.
This success story is something we should all keep in our minds for the future.
The Pi is a great little idea and I hope it inspires a new generation of engineers and entrepreneurs.
@Flyingscot, true. People have used Pi to build interesting products. One of the interesting application of raspberry Pi, that I came across was embed a raspberry Pi into a DSLR camera for wireless tethered shooting.
Agreed as long as you manufacture and sell in the same region, you can make up for the charges gone into building the product. But the moment you start thinking going global the cost where you manufacture and base cost in the country where you sell matters. Sometimes shipping costs are very high especially if you go global. May be that is one of the reasons why companies want to manufacture in China or other Asian regions. But then there is always chances of getting it copied and piracy issues.
This product reminds me of a tablet that Indian goverment is planing to launch.It would cost around $35. I remember I did an early booking last year but it has not yet come. Wonder how can they make it at such low cost. I guess thats why it never saw the light of the day atleast for me...
"Sometimes shipping costs are very high especially if you go global. May be that is one of the reasons why companies want to manufacture in China or other Asian regions."
@SP: That's a very valid point. Given the large size of Chinese market and their relatively high purchasing power, many companies enjoy the advantage of selling to the Chinese and other surrounding markets if they manufacture in China. If the transport costs become higher in the coming years, we might see companies going for decentralized manufacturing operations to save on shipping costs instead of consolidating all their operations at one location.
Recently I came across this article which I wanted to share here. It talks about the not so rosy aspects of Raspberry Pi which I am sure people who want to experience this platform will find very interesting.
Apparently, although its price is low, it seems like one will need to spend more to make teh best use of it. Furthermore, the CPU datasheet is not released by the manufacturer which makes embedded development a bit difficult in case of problems.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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