The semiconductor distribution network can create barriers for OEM equipment manufacturers to find and determine weighted cost/price risks for excess quantities as it relates to component sourcing and the total acquisition cost of the product. A major cause of this difficulty is inaccurate supply chain planning and poor forecasting.
Added to this are unforeseen problems in the supply chain. This problem is further exacerbated in extended contract electronics supply chains, where OEMs outsource sourcing activities and rely on EMS manufacturers’ sourcing teams to source components for OEMs’ EMS programs.
Even for OEM purchasing and raw materials managers working with qualified in-house planners, buyers and master planners, there is a risk of inaccurate forecasting combined with the need to rely on a distribution network for accurate “best pricing” information (note: the is not the case). not, still leads to inflated storage fees and outdated inventory or inventory that needs to be reworked to specification.
Contract Electronics Manufacturing Services (EMS) providers make a lot of money on warehousing and warehousing fees, more than the majority of electronics OEM sourcing managers realize. In fact, warehousing and storage costs contribute significantly to EMS and CM sales revenues.
Electronics EMS/CM providers want their customers to be successful, but they also make money when your manufacturing forecast isn’t entirely accurate – a hidden bonus for EMS/CM suppliers.
Nobody can predict the future. However, they can hold contract manufacturers accountable to justify their fees and prices for services. Knowing where to look and how to have those conversations with your EMS/CM partners is critical to protecting your profits and competitive position in an ever-evolving marketplace. Here, Venture Outsource demonstrates how you can use your knowledge to break down the costs and fees of your EMS/CM manufacturing programs and how to optimize your EMS procurement business model.
Adequate inventory tracking of raw materials and finished goods within your contract electronics supplier can save you time and reduce your liability costs.
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