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July 2015 • The PCB Magazine 19 Where companies have missed the boat (lit- erally and figuratively) is the sub-bullet under "right price" that explains the "right total cost of ownership (TCO)." OEMs and contract man- ufacturers tend to focus on the lowest unit cost and basically ignore the significant risks of not making decisions based on TCO, such as freight costs, additional inventory, excessive obsoles- cence and loss of revision flexibility. This was painfully obvious during the "Asian shift" (as coined by my friend Walt Custer) lead- ing to OEMs and contract manufacturers racing to China only to learn the hard way what their true TCO of this decision was. Supply Chain Strategy Strategic sourcing has become a critical component in supply chain today as companies have realized that a having a successful supply base takes a lot more than choosing suppliers based on RFQs and past history. Developing personal relationships with supplier manage- ment is mission critical when looking for a true partner and not a customer-supplier transac- tional agreement. The higher the technology, the more impor- tant the process for identifying, qualifying and managing your supply base becomes. Having a formal strategy takes a lot of work and resourc- es, but the payback in long-term, capable sup- pliers greatly outweigh the significant TCO of using a sub-par supplier. Supplier Identification and Qualification Strategically, deciding how to qualify new suppliers is the most critical step in the pro- cess. The underlying tool should be an audit/ survey that measures the quality system, Lean and technology. Audits are frequently based on the ISO 9001 standard in some iteration, which would be preferable if ISO registration is anoth- er qualification criterion (highly recommend- ed). There should be a re-audit frequency estab- lished and some provision for the supplier to provide demonstration of continued capability for the time period between audits. This could be in the form of quarterly Cpk reports, ISO sur- veillance audit summaries, etc. What is found too often are that suppliers have been grandfa- thered onto an AVL because they have always supplied materials, and that no one has ever au- dited the facility. Or, the only existing control is a self-audit that the supplier completes with no verification (which is probably fine since we all know that no one ever embellishes on their capabilities when filling out one of these!). There are a couple of categories that make up a robust strategy: predictive assessment tools Figure 3: The cliff Notes version of the 7 rights of scm. SUPPLy CHAIN IN THE 21 ST CENTURy continues Feature