The video is fantastic !!! . "if you can't see something, you can't measure it. If you can't measure it, you can't manage it" Yes,theideaofhavingsoftwarelikeacontroltoweractinginrealtimecollectingreal-timedataisneeded.SomyanswerisyesofcourseOEMshavetotakecontrolback.
Barbara, Your article hits a home run with me. OEMs have handed over too much control to the EMS companies but this was not by choice; more by necessity.
Adopting the EMS model was a necessary step for OEMs because it helped them respond to financial pressures. It took a huge portion of fixed, undifferentiated cost (the factory) and made it variable. It brought other advantages like better inventory turns, improved cash, and access to the latest manufacturing technology without R&D investment. It also provided cost reduction.
Continuous competitive pressures on OEMS have forced them to keep overheads thin as any overworked supply chain professional can attest. The result has been that the EMS relationship has not had the detailed attention that is required. Add to this the lack of transparency in electronic component pricing, undetected data errors and demand volatility and you get the situation you describe.
Lytica's business is essentially to untangle this and help OEMs get cost reduction. We do this with our consulting, cost reduction services and software tools like freebenchmarking.com. As a third party, we do this without increasing the fixed costs of the OEM to fill the void that has been created. Companies feel the impact of this void with higher product costs and inventory charges. Like with many illnesses, many companies are sicker than they realize.
Given the situation, here are some recommendations that help address the issue:
1.Make sure you operate with your EMS provider using a price book the clearly identifies each component price and the level of inventory by component. Price books should be updated at least quarterly.
2.With each price book release,
a.Make sure that the change in inventory levels is consistent with the demand that you have been driving
b.Mitigate all price increases. Verify with the component manufacturer that there has been an increase in price at the level reflected in the price book. Act on the findings
3.Benchmark your material pricing regularly to identify out of line priced components. Negotiate with the manufacturer to get better pricing on these out of line devices and make sure these new prices are used in the price book.
The steps to getting this under control are simple; doing it with too little resource makes it hard.
Simply put, the issue here is lack of governance, not delegation of control over execution. Governing an outsourced supply chain management engagement is not that complicated if certain basic concepts are put in place early on. Conceptually, a provider that oversees pooled demand can manage risk far more effectively than a single-consumer can and an OEM that knows how to outsource effectively can gain more than cost variablility benefits from an outsourced supply chain operation.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.