Garmin 2005 Annual Report Download - page 46

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ensure manufacturability and manufacturing cost control for its products. Garmin’s development staff includes
industrial designers, as well as software engineers, electrical engineers, mechanical engineers and cartography.
Garmin believes the industrial design of its products has played an important role in Garmin’s success. Once a
development project is initiated and approved, a multi-disciplinary team is created to design the product and
transition it into manufacturing.
Below is a table of Garmin’s expenditures on research and development over the last three fiscal years.
Fiscal Years Ended
December 31, December 25, December 27,
2005 2004 2003
($'s in thousands)
Research and development $74,879 $61,580 $43,706
Percent of net sales 7.3% 8.0% 7.6%
Manufacturing and Operations
Garmin believes that one of its core competencies is its manufacturing capability at its Shijr, Taiwan
facility, its Olathe, Kansas facility, and its Salem, Oregon facility. Garmin believes that its vertically integrated
approach has provided it the following benefits:
Reduced time-to-market. Utilizing concurrent engineering techniques, Garmin’s products are introduced to
production at an early development stage and the feedback provided by manufacturing is incorporated into the
design before mass production begins. In this manner, Garmin attempts to reduce the time required to move a
product from its design phase to mass production deliveries, with improved quality and yields. Reducing time to
market has enabled Garmin to offer several industry firsts, such as the Rino GPS-enabled Family Radio
Service/General Mobile Radio Service two-way radio, the iQue 3600 portable digital assistant with integrated GPS
and mapping, and the GNS 430, which integrates traditional aviation navigation and communications systems with
GPS in a single package.
Design and process optimization. Garmin uses its manufacturing resources to rapidly prototype design
concepts, products and processes in order to achieve higher efficiency, lower cost and better value for customers.
Garmin’s ability to fully explore product design and manufacturing process concepts has enabled it to optimize its
designs to minimize size and weight in GPS devices that are functional, waterproof, and rugged.
Logistical agility. Operating its own manufacturing facilities helps Garmin minimize problems, such as
component shortages and long component lead times which are common in the electronics industry. Many products
can be re-engineered to bypass component shortages or reduce cost and the new designs can quickly fill the
distribution pipeline. Garmin reacts rapidly to changes in market demand by maintaining a safety stock of long-lead
components and by rescheduling components from one product line to another.
Garmin’s design and manufacturing processes are certified to ISO 9001-2000, international quality
standards developed by the International Organization for Standardization. Garmin’s Taiwan manufacturing facility
has also achieved TS 16949:2002 quality certification, a quality standard for automotive suppliers. In addition,
Garmin’s aviation panel-mount products are designed and manufactured according to processes which are approved
and monitored by the FAA.
Materials
Garmin purchases components for its products from a number of suppliers around the world. For certain
components, Garmin relies on sole source suppliers. The failure of our suppliers to deliver components in sufficient
quantities and in a timely manner could adversely affect our business.
Seasonality