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80 SMT007 MAGAZINE I APRIL 2021 these smart cabinets—designed and patented by Epoch—right at the point of use of the pro- duction. Bringing the inven- tory right to the production floor eliminates all movements back and forth between inven- tory and production. is also reduces the number of inven- tory staff since parts are picked by the production staff utilizing the fully automated locator and FIFO dispensers. e smart cab- inet is fully integrated with the ERP system, ensuring full con- trol of the inventory. Since the implementation of the smart cabinet six years ago, Epoch has doubled its inventory material line items with- out increasing any head count on its material management team. Inventory Management At Epoch we operate our inventory from various perspectives. Our cycle stock is linked to our MRP system and procurement in close coordination with production planner which re-aligns the delivery date to ensure timely delivery of products needed for manufactur- ing. With the volatility and long delivery of electronic components, a safety stock is always built in to ensure we meet the demands of customers. At Epoch we have established an internal "inventory team" consisting of sales, production, procurement, and material man- agement to oversee the monitoring of the inven- tory. Having a diverse team that looks at inven- tory from sales, production, procurement, and material management perspectives becomes a challenge at times. But based on potential sales, previous historical data, and supplier delivery, the team has generally reached consensus on the level of safety stock to be built, to ensure on-time delivery and monitoring of excess inventory buildup. e pandemic and the shortage of electronic components has forced the team to drill down further, analyzing each component's past performance in forecasting and setting up the safety stock. With constant fluc- tuation in component delivery, the team finds itself constantly reassessing its safety stock. Supplier Relationships We recognize that without the full support of our suppliers, Epoch would not be able to drive the supply cost to its set targets. To ensure this close collabora- tion, we provide suppliers with long lead items with extensive forecast some as long as six to eight months. Epoch has also established VMI with many of its major suppliers and, to reduce excess work- load for the procurement team, EDI is imple- mented with suppliers. In the past, a sud- den surge in customer demand would mean spot buying of components at higher pricing. With the fluctuation of component availabil- ity and with much longer forecast provided to the supplier we have been able to reduce our inventory cost by around 4%. Conclusion As we have experienced, there is more to the reduction of supply chain cost than merely direct raw material cost. At times, the hid- den cost of material management far exceeds the direct raw material cost. is is especially true when we run small volume production. In today's world, we see many EMS and end customers focus only on cost of direct raw material, and at times setting arbitrary reduc- tion rates of a certain percentage per year. We strongly believe that to reduce our overall sup- ply chain cost we must look at technology, innovation, and close collaboration with our suppliers and customers. SMT007 Meghan Zou is Global Procurement Manager at Epoch International Enterprises. She has 18 years of experience in electronic procurement with multinational corporations. Meghan Zou