Issue link: https://iconnect007.uberflip.com/i/1518339
20 SMT007 MAGAZINE I APRIL 2024 You need a good vendor-supplier management program. that sub-penny part isn't holding up a couple hundred dollars on a board; now it might be holding up tens of thousands of dollars of a sys- tem. Put a couple hundred of those stuck jobs together, and it can get real dark really quickly. You'll need to have your inventory controls really tight, and you'll have systems visibil- ity on multi-level BOMs, and what-if scenar- ios. It's a different level of system and maturity when you go from 100 boards to 100 boxes. Are you building out 19-inch racks for a customer? If you're doing 100 racks a day, and you bring in two weeks' worth, suddenly you might have just filled a quarter of your facility with pallets. en you have ESD, foam boxes, packaging pallets, the loading dock—it's a major impact on a facility and not something you can go into overnight. If you want to make box build part of your core value proposition, then you must understand your cash-to-cash cycle— your supply base. As we went through the supply chain ripples, people got gun shy about just-in- time deliveries and quickly piv- oted to adding more safety stock and increasing inventory lev- els. Everyone relaxed in terms of inventory efficiencies. However, when you manage these higher- level assemblies, you may need to con- sider returning to just-in-time delivery prac- tices. You need a good vendor-supplier man- agement program. With an in-region supplier, those challeng- ing parts can be fed upstream into your sup- plier base. Now you don't need to bring in two weeks' worth of those racks. You can agree to 100 a day, transform them, and ship them out. e next day, another 100 show up, but it requires that you have vendor management in place and some reliable local partners. Matties: You're describing a sizable investment just to get started. Do most EMS companies offer box-build services? ere are some ways to mitigate the amount of that capital requirement. But this has been the Tier 1 "secret sauce" for years: ey deliver the speed and customization that the OEMs use to differentiate. It's an up-and-coming area in the Tier 3 space. When you've got an OEM customer who regularly wants to pull or push some- thing on the schedule, it's a good opportunity to understand their business. What's causing them to move schedules? Maybe they're hav- ing staffing problems, or their systems aren't as robust as yours. Ask your customers if they've thought about outsourcing at a higher BOM level. Maybe they're at that tough spot where they either take on another 100,000 square feet or outsource. If they're struggling with their sourcing model, it's an opportunity to take on larger pieces of business. If you can work out a partnership agreement, where you're not car- rying a ton of capital, then maybe you're still invoicing at the board level and holding con- signed stock, and you charge for value-add as you keep going upstream. at could take pres- sure off the capital requirement. But it requires that you have really good systems; you can control who owns what, the delivery details, and compliance, as well as work with everyone's accounting practices and system requirements. It's all doable, but you can't afford to make a lot of mistakes at these higher levels. Marcy LaRont: Is cash management the biggest barrier for Tier 3 companies? It's a combination of cash and systems. You'll need multi-layer capability with tight trace- ability, and with that comes additional oppor- tunities for back-end services, like repair and refurb services. But, if somebody cuts in an ECO today, three levels down on your BOM, you'll have to manage that efficiently. Many Tier 3 companies' existing tools may have those