SMT007 Magazine

SMT007-Nov2022

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26 SMT007 MAGAZINE I NOVEMBER 2022 Your Shortage Is Someone Else's Excess Feature Article by Chintan Sutaria CALCUQUOTE The Problem Excess inventory is a ubiquitous issue in the electronics manufacturing services (EMS) industry, and it is made worse by the complex- ity and volatility of the modern supply chain. Considered an unavoidable cost of doing busi- ness, unchecked inventory cost has wreaked havoc on manufacturers without strict con- trols in place to keep their businesses safe. Excess inventory is not only costly for man- ufacturers themselves, but also for their end customers. Unwillingly, manufacturers are sometimes forced to eat this cost to avoid dis- rupting relationships with their customers and with the hope of making up the losses in next year's orders from the customer. e other end of the inventory position is also a serious problem. While excess inventory can tie up much-needed capital, a lack of nec- essary inventory can prevent an EMS company from shipping assemblies to their customers. In fact, missing just one part can have a signif- icant impact on the amount of capital tied up in partial kits waiting to be released to the pro- duction floor, or in incomplete work orders. e adage, "e most expensive part on the BOM is the part you don't have," became pop- ular 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 nor- mal 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 nor- mal ebbs and flows of a market. is is because even when the market in aggregate has suffi-

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