Demand Forecast Planning and Warehouse Storage Fees in Electronic Contract Manufacturing
The semiconductor distribution network can create barriers for OEMs to find and determine weighted excess volume cost/price risk with respect to component sourcing and total landed cost of product . One of the root causes of this difficulty is inaccurate supply chain planning and poor forecasting.
Add to that unforeseen supply chain issues. This problem is further exacerbated in extended contract electronics supply chains where OEMs outsource the sourcing activity, relying on EMS manufacturers’ sourcing teams to source components for EMS programs. from the OEM.
Even for purchasing and OEM product managers working with internal planners, buyers and skilled master planners, the risk of inaccurate forecasts combined with the need to rely on a distribution network for accurate information on better prices” (hint: it doesn’t), more often than not, always results in excessive storage costs and outdated inventory, or inventory that needs to be reworked to specification.
Contract Electronic Manufacturing (EMS) service providers make a lot of money on storage and warehousing fees, more than the majority of OEM electronics sourcing managers realize. In fact, warehousing and storage costs contribute significantly to EMS and CM’s revenue.
EMS/CM electronics vendors want their customers to succeed, but they also profit when your manufacturing forecasts are less than accurate, which creates a hidden bonus for EMS/CM vendors.
No one can predict the future. But you can hold contract manufacturers accountable for justifying their fees and service pricing. Knowing where to look and how to have those conversations with your EMS/CM partners is essential to protecting your profits and your competitive position in an ever-increasing market environment. Venture Outsource shows how you can leverage insights to dig deeper into the costs and fees of your EMS/CM manufacturing programs, and how you can refine your EMS sourcing business model, here.
Having proper inventory tracking of raw materials and finished goods within your contracted electronics supplier can save you time and reduce your liability costs.
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