Your scarcity is someone else’s excess


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The problem
Excess inventory is a pervasive problem in the Electronic Manufacturing Services (EMS) industry and is compounded by the complexity and volatility of the modern supply chain. Considered an unavoidable cost of doing business, the cost of unchecked inventory has taken its toll on manufacturers without tight controls in place to keep their businesses safe. Excess inventory is not only costly for the manufacturers themselves, but also for their end customers. Reluctantly, manufacturers are sometimes forced to eat that cost to avoid disrupting relationships with their customers and in hopes of making up for losses in next year’s customer orders.

The other end of the inventory position is also a serious problem. While excess inventory can tie up much-needed capital, a lack of needed inventory can prevent an EMS company from shipping assemblies to customers. In fact, the absence of a single part can have a significant impact on the amount of capital tied up in partial kits waiting to be delivered 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 2018 MLCC shortage and continued to ring true during the latest round of chain constraints. ‘supply.

Supply chains and markets experience normal fluctuations, so this type of oversupply and shortage situation is not necessarily unique. But the impact on OEMs and EMS companies appears to be far more extreme than the normal ebb and flow of a market. Indeed, even when the market as a whole is sufficiently supplied, the right components are not in the right places at the right time.

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

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