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Engineering. The art of doing that with one dollar that any bungler can do with two, after a fashion.









Arthur Wellington's famous definition of 'engineering' is repeated here from the home page. This is a vitally important concept that needs to be understood by everyone involved with engineering projects of all kinds...

Engineering decisions
are economic decisions!



"The Economics of Automatic Testing has been a great help to me as a test engineer.

Understanding the economic basis for developing well-formed test strategies that combine the right mix of technology, time-to-market, cost and quality are what this book is all about. There are very few books written that approach this topic and this is one of the best. Its clear that the author is intimately familiar with the challenges confronting test engineers and provides sound advice from his experience. The book is replete with examples, charts and graphs.

Offering this concise and informative book electronically makes it a great resource that will be even more available when you need it."

Jim Schoen - Senior Test Engineer
Sure Power Industries (Cooper Industries)


Engineering economics for electronics

The book is about 'engineering economics', sometimes refered to as engineering economy, but is focussed directly on the electronics manufacturing industry. As a result it differs from most engineering economics books in several ways...

A. It actually talks about the engineering! Most engineering economics books do not. They show in great depth the comparison, justification and financial methods that can be applied to engineering situations but they do not talk about the engineering itself. This is not a criticism however—they can't cover any engineering aspects because there are so many forms of engineering and these are general purpose books. This book is not so general purpose but the methods described can also be used for many other situations quite unrelated to electronics.

B. It shows how the test function fits with everything else. A 'Hierachy of strategies' discussion shows how the corporate strategy drives the business unit strategies—the business unit strategies drive the marketing, design and manufacturing strategies—and these then drive the test strategies in the factories and the field. Chapters on quality, time to market, design, field service and test strategy analysis show how eveything fits together and the influence that testing decisions can have.

C. Having done all of the comparisons, the analyses, the justifications and the ROI—what next?—you need to convince senior managers to go along with your results and find a bit of loose change to fund the project. The closing chapter offers advice on doing this, based on the author's decades of experience with presentations.

As indicated on the home page, some of the engineering elements of the book may, at first sight, appear to be a bit out of date. Well they are—but only in terms of performance, prices, defect rates etc. The calculation and analysis methods shown are what is important and the numbers used to define the performance features will vary between different equipment models anyway.


Cover notes from the printed edition

The speed of bringing cost-effective, high-technology and high-quality
products to market is of key importance in today's competitive environment. The use of automatic test equipment that can minimize costs, maximize productivity and maintain or improve quality, has an important role to play in gaining the necessary advantage. However, it has to be used effectively.
The second edition of The Economics of Automatic Testing is much
broader in scope than the first, covering all major business issues affecting the competitiveness of a company, as well as the detailed issues surrounding testing decisions. The book is based upon the concept that the optimum strategy for the testing of electronics can only be established after a detailed economic analysis of the alternatives. Thus, all the issues that have to be considered, and the various analytical approaches that can be used to make a test decision, are discussed in detail in the first two-thirds of the book. Particular emphasis is placed on the key roles of quality and time-to-market and their effect on the decision process. The remaining chapters deal with the activities that follow the decision, including the evaluation of commercial testers, the financial justification and the presentation of the proposals to senior management in the appropriate terms.

Special features...


Advice on the use of economic analysis techniques to compare
alternative test strategies


Comprehensive guidance on presenting the financial case to senior management


Practical help in the form of numerous worked examples, reference tables, charts and a sample test strategy model


The contents listing shown below is also available in PDF form on the 'Downloads' page of this website.

Contents List

1. Introduction and overview
1.1 What cost quality?
1.2 Why economics of automatic testing?
1.3 The comparison of alternatives
1.4 Other factors
1.5 Test strategy defined
1.6 Optimization versus sub-optimization
1.7 Life cycle costing
1.8 Strategies and tactics
1.9 Does testing add value?
1.10 Six-sigma quality
Is six-sigma good enough?
1.11 A simple defect occurrence model
1.12 Forecasting, estimating and guesswork
1.13 Business perspectives
A change of emphasis
         The strategy hierarchy

2. The quality revolution
2.1 Background
2.2 The Japanese secret
2.3 What is quality?
2.4 The lessons learnt
2.5 Quality and test economics
        Burning the toast
        Think ‘Escape Rate’—not ‘Fault Coverage’

2.6 Product liability
2.7 The right approach
2.8 Quality data collection systems
2.9 Summary
3. Time to market
3.1 The product life cycle
3.2 Demand cycles, technology cycles and product cycles
3.3 The ideal product life cycle
3.4 Time to market and profit
3.5 Modelling the effects of time to market
3.6 Other factors to consider
3.7 What does all of this have to do with testing?
4. A primer of test economics
4.1 Jargon
4.2 Economic analysis
4.3 Incremental investment
4.4 Costs and savings
4.5 ATE cost areas
        The purchase price and other up-front costs
        Test programming and test fixture preparation costs
        Test, diagnosis and repair costs
        Maintenance costs
        Field-service costs

4.6 The ‘rule of tens’
        Calculation methods
        The effect of different fault types

4.7 The extended rule of tens
4.8 Statistics
        The need for large numbers
        Probability situations
        Mutually exclusive events
        Independent events
        The special rule of multiplication revisited
        Distribution theory

4.9 Yield
4.10 Fault coverage
4.11 Apparent yield
4.12 Perceived yield
4.13 The effects of incorrect repair action
4.14 Checking your data
4.15 Perceived yield for functional test
4.16 Using yield progression to study the process
4.17 Capacity calculations
        When will additional capacity be required?
        Capacity calculations when estimated maximum capacity is not constant

4.18 Testability
5. Design and test economics
5.1 The ‘over the wall’ problem
5.2 Design... for... to... and... test (the right philosophy)
5.3 What are the economic issues?
5.4 PCB simulation
5.5 Quality benefits
5.6 The economics of DFT
6. Component test economics
6.1 Do users receive bad components?
6.2 Can incoming inspection still be justified?
6.3 Example
        The production situation
        Component testing costs
        Board test costs
        System testing costs
        Total system testing costs
        Field-service costs
        Adding incoming inspection to the strategy
        System testing costs (TDR) with incoming inspection
        Field-service costs with incoming inspection

6.4 Predicting escapes to the field
6.5 Will all defects result in a field fallure?
6.6 Determining field-service savings
        Example of field-service cost analysis
6.7 Component failures and board failures
6.8 Sample testing and the new quality ethic
6.9 How effective is sample testing?
6.10 Supplier’s risk and consumer’s risk
6.11 Average outgoing quality level (AOQL)
6.12 Other sampling plans
6.13 Lot tolerance per cent defective (LTPD)
6.14 Average outgoing quality level (AOOL)
6.15 Component testing alternatives
6.16 Comparing the costs of no testing, sample testing and 100 per cent testing
6.17 Break-even analysis
6.18 Increasing capacity with an auto handler
        Example: comparison between adding a second tester or an auto handler
6.19 Stress testing of components
        Component reliability and ‘infant mortality’
        Economics of burn-in
        Example: potential cost of early-life failures
        Example: savings in warranty costs due to burn-in
        Burn-in at what stage of production?
        Soak test

6.20 Summary
7. Board test economics
7.1 Overview
7.2 Background
7.3 Testing options
        No testing
        Visual inspection
        Bare board testing
        Shorts testing
        The manufacturing defects analyser
        In-circuit testers
        Functional testers
        Combinational testers
        Performance test systems
        ‘In-house’ ATE systems
        Manual board test

7.4 ‘Process’ testing and ‘performance’ testing
7.5 High speed versus performance
7.6 The fault spectrum
7.7 The major cost areas
7.8 Equipment costs
7.9 Maintenance costs
7.10 Set-up costs
7.11 Operational costs
7.12 The cost of the following test stages
7.13 Field-service costs
7.14 A simple example
7.15 Another view of board test economics
7.16 The search for cheaper board testing
7.17 Changing yields and fault spectra
8. Test strategy analysis
8.1 Overview
8.2 Test strategy determinants
Fault spectrum
Production mix
Market segment
Design for test (DFT)
The four forces

8.3 Variation in the key determinants
8.4 Industry trends
8.5 Increased yield and fault spectrum changes
8.6 The ideal test strategy?
8.7 Commonly used test strategies
        Functional board tester based strategies
        Dynamic (high-speed) functional tester based strategies
        In-circuit board tester based strategies
        High-speed in-circuit based test strategies
        Combinational tester based test strategies
        Performance tester based test strategies

8.8 The economic analysis of test strategies
8.9 Modelling the test strategy
        Getting the formulae right first time, every time
        Using flow diagrams to check formula accuracy

8.10 An example of a test strategy analysis model
8.11 Overview of EVALUATE
The testing decision process
8.12 Test stages modelled
8.13 Forms description
        Header (Fig. 8.23)
        Board Data (Fig. 8.24)
        Fault Spectrum (Fig. 8.25)
        Production Data (Fig. 8.26)
        Test Stage Data 1 and 2 (Figs 8.27 and 8.28)
        Fault Coverage Matrix Forms (Figs 8.29, 8.30 and 8.31)
        Test Strategy Selection (Fig. 8.32)
        Defect Detection Matrix (Figs 8.33 and 8.34)
        XXX Results (Fig. 8.35)

8.14 Using EVALUATE
8.15 Test strategy determinants
        Fault spectrum
        The markets served
        The production mix

8.16 Types of analysis
8.17 Sensitivity analysis
8.18 Entering data
8.19 Interpreting the results
        Test cost
        Diagnosis cost
        Repair cost
        Fixture cost
        ECO cost
        Field cost (quality)
        Capital cost
        Number of testers required
        Spare capacity
        Number of repair stations required

8.20 The hidden forms
8.21 Input parameter reference
8.24 The ‘Fault Spectrum’ form
        Design induced defects
        Supplier induced defects
        Manufacturing induced defects

8.25 The ‘Production Data’ form
8.26 The ‘Test Stage Data’ forms
8.27 The ‘Fault Coverage Matrix’ forms
        Design induced defects
        Supplier induced defects
        Manufacturing induced defects

8.28 An example analysis using EVALUATE
9. Evaluating automatic test equipment
9.1 The evaluation team
9.2 Risk
        The cost risk
        The technology risk
        The support risk
        The reliability risk
        The vendor credibility risk

9.3 Economic evaluation
9.4 Technical evaluation
9.5 Evaluation of support capabilities
9.6 Reliability evaluation
9.7 Evaluation of vendor credibility
9.8 Comparison charts
9.9 Tangibles and intangibles
9.10 The ‘essentials of test’
10. Field-service economics
10.1 Overview
10.2 The build-up of spares inventory
10.3 Other savings
Repair costs
Inventory (stock) carrying costs
Inventory avoidance/sell-back
Inventory handling and transportation
Landing costs in foreign countries

10.4 Summary/checklist
11. Financial appraisal
11.1 Return on investment
11.2 Cash flow conventions
11.3 The concept of increment investment
11.4 Payback analysis
Advantages and disadvantages

11.5 Accounting rate of return (ARR) (or average ROI)
11.6 DCF and the time value of money
Example of use of DCF techniques
11.7 Minimum acceptable rate of return (MARR)
11.8 Net present value (NPV)
NPV advantages
NPV disadvantages

11.9 Internal rate of return (IRR)
Example IRR calculation
Advantages of IRR
Disadvantages of IRR
The reinvestment assumption
Reversal of ranking
The problem of multiple IRRs

11.10 Modified internal rate of return (MIRR)
11.11 The external rate of return (ERR)
11.12 The effects of taxation
11.13 Depreciation
11.14 Residual value or salvage value
11.15 Inflation accounting and investment appraisal
11.16 The MARR revisited
11.17 Example using all of the methods
Net present value (NPV)
Internal rate of return (IRR)
The modified internal rate of return
NPV calculation using the current UK allowances system
The effect of including inflation in the MARR
Summary of results

11.18 Example: comparing three alternative in-circuit hoard testers
Payback calculations
11.19 Summary
12. Presentation to management
12.1 Sensitivity analysis
12.2 Other factors
12.3 Brevity is key
12.4 Keep it simple
12.5 Emphasise important issues
12.6 A. checklist for the proposal to management
The nature of a presentation
Overcoming nerves
The structure of the presentation
Question Time
Presentation Techniques
The Delivery

12.8 Visual aids
Problems with the word slide
Presentation media
Creating the visual aids

12.9 Summary
Visual aids

Appendix A - Loaded or unloaded labour rates?
Appendix B - Calculation of equipment costs
Example 2
Appendix C - ICT—calculation of yields, PFB and ideal diagnosis & repair loop numbers
Example 1
Example 2
Calculation of the ideal loop number
Appendix D - The relationship between average FPB and
average FPFB

Appendix E - Useful Tables & Charts
Appendix F - The Fault Spectrum
Appendix G - Abbreviations
Appendix H - Bibliography