Terms and Definitions

Approved vendor list (AVL): listing of all approved sources, in addition to product part descriptions and part numbers.

Bill of materials (BOM): a comprehensive listing of all components and subassemblies that go into a specific product, showing the quantity of each required to assemble the item or finished product.

Box-build: sometimes, also called systems integration, assembly work other than printed circuit board (PCB) production. The electromechanical assembly process involving enclosure fabrication, installation of subassemblies and components, and installation and routing of cabling or wire harnesses.

Cash conversion cycle: days of inventory plus days sales outstanding minus days of payables.

Clean room: a facility in which environmental elements such as heat, humidity, microbial growth, and user cleanliness are controlled. Used for assembly/packaging of sensitive components or products.

Contract manufacturer: an organization that engages in product assembly, engineering services, order fulfillment, product distribution, and aftermarket services. A contract manufacturer usually works on behalf of an OEM. However, some OEMs can also function as contract manufacturers.

Core competencies: activities or practices, such as product development, determined by a company as critical to its long-term success and growth. Core competencies are typically based on skill or knowledge sets rather than products or functions. They provide return on investment and act as a barrier for other companies trying to enter a particular market. Many manufacturers choose to focus on core competencies and outsource production, or activity-based, tasks. Many OEMs decide to keep their high-level engineering and design work as internal competencies, particularly as these might apply to new products and highly complex products.

Corrective action request (CAR): an action item that surfaces whereby the requesting party (either the OEM or contract manufacturer) asks the party responsible to conduct a root cause analysis and help bring the issue to resolution.

Days of inventory: the amount of inventory (two period average) divivded by cost of goods sold (COGS) divided by the number of days. Inventory days metric measures the number of days of inventory a company has on hand given current production levels.

Days of payable: a company's payables (two period average) divided by its cost of goods sold (COGS) plus its sales, general and administrative costs divided by number of days.

Days sales outstanding: a company's receivables (two period average) divided by revenues divided by number of days.

Design for manufacturing (DFM): a process integrating manufacturing and optimization principles into the earliest stages when designing and developing a product to be manufactured.

Design for test (DFT): a process that is typically combined with DFM that optimizes product designs for testing in a production environment.

Electronics manufacturing services (EMS): an industry based on providing contract design, manufacturing and product support services on behalf of OEMs. Traditional services include PCB assembly and box-build and testing. Today, EMS providers are continuing to absorb more and more of the supply chain and they are providing numerous services such as supply chain management, global distribution, logistics, customer support and warranty repair. However, in most cases, all intellectual property (IP) belongs to the OEM.