Issue link: https://iconnect007.uberflip.com/i/1357726
APRIL 2021 I SMT007 MAGAZINE 17 Rodgers: We talk a lot about safety stock—vari- ability of demand. ere's a reason we call it fore- casting; we really don't know what the demand is going to be. We hold safety stock in order to protect ourselves from a sudden increase in demand, and usually it's better to hold a little bit more inventory than not enough inventory. We caution students that when you don't have enough inventory you run the risk of a stock- out, which affects your customers who have money in their pocket and want to buy. You've done the hard work and convinced them to buy your product; that's good news as far as your marketing and sales organization, but you don't have products to sell. at's a tragedy. ose customers may never come back. For most businesses, it's better to spend a little more money on safety stock and excess inventory than to not have enough inventory. Again, if we're worried about risk in the sup- ply chain, like a tsunami in Japan, a volcano in Iceland, or shipping delays at the port of Los Angeles—which is what's going on now—it's better to hold extra inventory. Holden: What fundamentals do people not know about or forget about that you would emphasize vs. a thing that everybody talks about? Rodgers: Besides inventory management, I would emphasize basic production planning. ere are lead times associated with all of these decisions. Factories and supply chains don't have extreme flexibility. Sometimes it is better to have a supplier across the street than a sup- plier on the other side of the world because the lead time is shorter. A decision you make today could take weeks to properly implement. Supply chains are hard to turn, like a con- tainer ship. It takes a long time to implement all the processes, to suddenly change the sup- plier. To increase the order quantity from a supplier could take weeks or months. Because suppliers don't necessarily have a lot of extra capacity laying around, you've got to do a bet- ter job of planning. Matties: Do you see a desire at EMS compa- nies for that sort of model, or more of a vertical integration and captive facilities? Rodgers: Captive has to clearly provide a competitive advantage. You can't justify the expense unless you get some kind of competi- tive advantage. By building your own products, do you achieve some level of performance or quality that you can't get through a mix-and- match approach? Obviously, there are a lot of The recent Suez Canal blockage held up trade valued at over $9.6 billion per day, according to data from Lloyd's List.