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Electronics manufacturers like Emerald EMS are finding that as the consumer markets experience a slowdown, and supply chain woes are lightening, challenges persist. Chris Lentz, vice president of supply chain logistics, and Joe Garcia, vice president of sales and marketing, break down the issues their company has faced over the past two years in working with vetted sources, not backing down in the face of adversity, and most importantly, forging better relationships with customers. One thing they’ve learned is how to be creative in finding parts while maintaining their reputation with customers. Just because you find it cheaper online doesn’t make it valid. Chris and Joe explain.
Johnson: With respect to being a responsive EMS supplier to your customers, what are the biggest challenges you’re facing right now?
Chris Lentz: Last year, we had to use non-franchise suppliers more than ever—more than I would ever like to, more than I have in my history. We restrict it to three or four that we’ve vetted and audited. But this year, as the market has become even more constrained, it’s very difficult now to find some of the same parts the automotive guys are looking for. Brokers are springing up out of the woodwork with unbelievable pricing, sometimes 50 times, if they have it, of the normal cost. That makes this year a little bit tougher.
We see some break as the consumer markets are slowing, with cellphone demand, and other products. We get dribs and drabs of parts we weren’t expecting to see for six months. For example, we may need a shipment of 10,000, but we’ll get a reel of 3,000. I have a lot of direct, high-level contacts with manufacturers, and while they won’t say there’s a consistent market downturn right now, they know people are a little scared about the possibility of a recession, so some orders are getting pushed out or canceled. That’s to our benefit, but we still have so many we are chasing right now.
For the teams at our sites, our priority is working the relationships with our suppliers, leveraging our customer relationships, and doing anything we can to resolve these shortages. We are asking our customers for an extended forecast, where we can obviously get the pipeline out there. Most of our customers are well educated now. Many of them have brought in supply chain experts, often from the EMS supplier industry, so they understand what’s going on and the reason we need to forecast. We do anything to help, including long lead BOMs, safety stock, and others.
Johnson: Are you getting better forecasts from your customers?
Lentz: Some of them. Some are still hesitant to hedge on their demand, which is understandable.
Joe Garcia: We’re getting more visibility in the forecast, but whether they’re actually better, we don’t know. Some things we assume to be true (and may not be) are that customers might be double ordering, or they may be giving signals to excite the supply chain—they may think that it is going to create more action around getting parts. We’re getting more visibility by way of forecast; I just don’t know if they’re more accurate yet.
Johnson: When I was visiting your facility recently, I asked whether customers’ behaviors were changing. Were they, for example, sending more kitted parts? Are you seeing behavior changes from your customers? For example, trying to take more control over sourcing the parts themselves in this environment?
Lentz: At the NPI center we’ve seen more consigned kits, but not that many more from a production level. Are customers trying to pipeline more? Yes, some. When Joe brings in a new customer and he says, “They’ve been pipelining the long lead time components,” there’s nothing better than that. We are seeing a little bit of change in behavior in that, but we’re still the victims of a lack of forecast where we have a 52-week quote, the order comes in at 15 weeks, then the load and chase begins.
Johnson: It must be an order of magnitude that is more complex right now?
Lentz: I’ve been in the business 35 years, in supply chain for 32 years, and it’s by far the most challenging set of circumstances I have ever seen. There are so many things at play. We must be careful what we’re bringing in, but you can’t just push everything out. With the market the way it is now, if you have a 52-week part you can’t push parts out to line up with that, or you’ll risk going to the back of the line; distributors and the manufacturers will shift them to someone. We must be savvy.
Obviously, there’s pressure to push out inventory, and if it is very high dollars, we will look to partner with our customers to help us cover the inventory costs, to pay for it and let us put it in consignment. We’ve had some good reactions from our customers on that. As we further educate them, they understand that we can’t just push it out. But we also don’t want to bring in millions of dollars in parts if one part keeps us from shipping. We’re trying many different avenues to resolve those, including working with our customers for alternates when they’re available so they can design them in quickly. We’re also using brokers where we needed.
To read this entire conversation, which appeared in the September 2022 issue of SMT007 Magazine, click here.