The materials cost of goods sold (MCOGs) is between 75 percent and 85 percent for the average electronics product. There’s no doubt best practices in procurement and tight inventory turns helps electronics hardware companies compete in the marketplace, especially with launching non-unique devices (think: white box ODM cloud servers) where price and features/functionality drive purchase decisions over brand awareness.
No doubt, effective enterprise resource planning (ERP) is important.
Below I highlight some industry best practices for specific materials-focused functional groups within EMS providers, along with key responsibilities (and some of the challenges these groups face), which can have a direct impact on effective materials management in a fast-paced outsourced electronics manufacturing environment.
Procurement and materials management performed by an EMS provider is different from purchasing and managing components performed by most process-intensive OEMs. To highlight this difference, let’s compare an EMS provider to, say, a chemical manufacturer.
It’s not uncommon for providers to source 2,000 different components to produce 500 printed circuit board assemblies. Whereas, the chemical manufacturer may source only six to ten elements to produce hundreds, or even thousands, of different chemicals. There is a big difference in the number of required components v. elements.
Let’s look at the triggers in the EMS provider that helps drive the sourcing decisions and related activities enabling providers to produce those 500 PCB assemblies. (Read: How to drive costs out of your EMS manufacturing program)
The EMS provider team is made of the following personnel and site functions, including; a master scheduler, planning, materials and component buyers in the purchasing department; warehouse receiving; stock room, backflushing / kitting, cycle counting, a materials review board (MRB) and materials scrapping. (See also: Tips and articles about planning and purchasing strategy)
Examining some of the responsibilities above help form a wider scope of understanding how various materials-based groups work together to move an OEM’s program through this portion of the supply chain. (Providers: Submit your company in our EMS Resources Directory Marketplace)
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The master scheduler
Incoming (arrival of) the OEM customer order is considered the de-coupling point for active materials management in the scope of the greater OEM-EMS relationship.
EMS providers, in turn, use materials requirements from OEM orders as the tipping point that nudges the EMS provider master scheduler into action.
Some questions the master scheduler needs answers to include: Where do I start ‘pushing’ materials and, where do I start ‘pulling’ materials?
Where:
Pushing = Inputting the OEM forecast to drive [OEM] material requirements
Pulling = Putting in the purchase order (PO) to drive EMS material responsibility while minimizing business and materials risk at the provider.
To understand the role of the EMS provider master schedule, see below for purchase order demand being placed into the system.
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