Your Shortage Is Someone Else’s Excess

Reading time ( words)

The Problem
Excess inventory is a ubiquitous issue in the electronics manufacturing services (EMS) industry and is made worse by the complexity and volatility of the modern supply chain. Considered an unavoidable cost of doing business, unchecked inventory cost has wreaked havoc on manufacturers without strict controls in place to keep their businesses safe. Excess inventory is not only costly for manufacturers themselves, but also for their end customers. Unwillingly, manufacturers are sometimes forced to eat this cost to avoid disrupting relationships with their customers and with the hope of making up the losses in next year’s orders from the customer.

The other end of the inventory position is also a serious problem. While excess inventory can tie up much-needed capital, a lack of necessary inventory can prevent an EMS company from shipping assemblies to their customers. In fact, missing just one part can have a significant impact on the amount of capital tied up in partial kits waiting to be released to the production floor, or in incomplete work orders. The adage, “The most expensive part on the BOM is the part you don’t have,” became popular during the MLCC shortage of 2018 and has continued to ring true during the latest round of supply chain constraints.

Supply chains and markets experience normal fluctuations, so this type of excess and shortage situation is not necessarily unique. But the impact on OEMs and EMS companies seems to be much more extreme than the normal ebbs and flows of a market. This is because even when the market in aggregate has sufficient supply, the right components aren’t in the right places at the right times.

Continue reading this article in the November 2022 issue of SMT007 Magazine.


Suggested Items

Big Data Can Bring Your Business Back

04/20/2022 | Zac Elliott, Siemens Digital Industries Software
Let’s face it, in the past, electronics manufacturing has not been a big business for North America. A majority of electronics are assembled in Asia where supply chains and operating costs offer many economic advantages. In North America, the electronics manufacturing industry has been generally focused on lower volume, high-cost devices, while higher volume products are produced elsewhere. However, the COVID pandemic and various legislation in the U.S. are changing the situation, making electronics manufacturing in North America a more attractive option. How can factories in North America compete for the same type of manufacturing traditionally performed in lower-cost regions?

Going Global: Bridging Today's Labor Gap

03/18/2022 | I-Connect007 Editorial Team
No doubt you will relate to Foad Ghalili when he expresses his concerns about rising input costs to doing business, from getting the right components, to delivery times, and price increases. But what’s unique for the president of Epoch International is the way his company has leveraged its U.S. and China operations to make the most of the other thing on everyone’s mind—the labor shortage. If you’re not already implementing his ideas, you will walk away from this interview with some sure-fire tips.

Real-time Strategies to Offset Soaring Expenses

02/09/2022 | Nolan Johnson, I-Connect007
Supply chain, distribution, and price inflation are headline news topics these days. To better understand how EMS companies do—or could—respond to pricing pressure from input costs, we asked both EMS industry company representatives and EMS equipment manufacturers to comment on how the industry can respond to current pressures. Editor Nolan Johnson spoke with several EMS executives about a variety of ways for dealing with rising costs.

Copyright © 2022 I-Connect007 | IPC Publishing Group Inc. All rights reserved.