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.

Share




Suggested Items

Real Time with … IPC APEX EXPO 2023: Mycronic Extends Reach

01/11/2023 | Nolan Johnson, I-Connect007
Clemens Jargon, senior vice president of High Flex at Mycronic, shares his thoughts about the company’s performance in 2022 (it was a strong year), plans for the new year (turnkey solutions), and what visitors to the Mycronic booth at the show can expect to see in the company’s state-of-the-art Iris™ 3D AOI vision technology.

Real Time with...SMTAI: VJ Electronix Introducing Component Auto Align Option

10/12/2022 | Nolan Johnson, I-Connect007
Nolan Johnson and James Bishop, eastern regional sales manager at VJ Electronix, prepare for the upcoming SMTAI conference in Minneapolis by discussing the current market challenges, changes in how EMS companies are making use of their rework stations, and how VJ Eletronix is meeting customers with new functionality.

Axiom Inspired by Industry Challenges

09/20/2022 | Michael Schindele, Axiom
After living through more than two years of the pandemic, we are very aware of the issues facing the electronics industry. We have witnessed months of factory shutdowns, labor disruptions due to a reduced workforce, and country, regional, and citywide COVID regulations and shutdowns. I will describe some of the issues we’ve been facing, and then explain how we learned to be creative and look for the silver linings in these disruptions.



Copyright © 2023 I-Connect007 | IPC Publishing Group Inc. All rights reserved.