The semiconductor distribution network can create barriers for OEM equipment manufacturers to find and determine weighted excess volume cost/price risk as it relates to components sourcing and product total landed cost. One root cause for this difficulty is inaccurate supply chain planning and poor forecasting.
Add to this, unforeseen supply chain issues. This problem is further exasperated in extended contract electronics supply chains where OEMs outsource procurement activity, relying on EMS manufacturer procurement teams to source components for the OEM’s EMS programs.
Even for OEM purchasing and commodity managers working with skilled, internal planners, buyers and master schedulers, the risk of inaccurate forecasts combined with having to rely on a distribution network for accurate ‘best pricing’ info (hint: its not), more often than not, still leads to excessive storage fees, and obsolete inventory, or inventory that needs to be reworked to spec.
Contract electronics manufacturing services (EMS) providers make a lot of money on storage and warehousing fees, more than the majority of electronics OEM equipment sourcing managers are aware of. In fact, warehousing and storage costs contribute, significantly, to EMS and CM top line revenues.
Electronics EMS/CM providers want their customers to be successful, but they also make bank when your manufacturing forecast is less than accurate – creating a hidden bonus for EMS/CM suppliers.
Nobody can predict the future. But you can hold contract manufacturers accountable to justify their fees and pricing of services. Knowing where to look and how to hold these conversations with your EMS/CM partners is crucial to protecting your profits and competitive standing in an ever-increasing market environment. Venture Outsource demonstrates how you can leverage know to drill down into the costs and fees of your EMS/CM manufacturing programs, and how you can fine-tune your EMS sourcing business model, here.
Having adequate raw materials and finished goods inventory tracking inside your contract electronics provider can save you time, and reduce your liability costs.
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