Supply chain director at Speedboard Assembly Services, Karen Heath, explains how contract electronics manufacturers can add value through efficient supply chain management.
With customers expecting more and more flexibility from suppliers, as well as shorter lead times and competitive prices, considerable pressure is placed on the supply chain. A good CEM therefore needs not only to embrace that pressure, but also to find ways of adding value to the outsourcing relationship and simplifying life for its suppliers. Here’s how Speedboard achieves these goals.
High consumption-rate, small value components, such as generic resistors, capacitors and diodes, are managed under a consignment stock agreement made with a single, preferred supplier. Approximately 2,500 of the fastest moving component reels are located on the shop floor, in an area set aside specially for off-line set up. When needed, reels are taken by an operator, loaded onto feeders, used and then returned. Each full reel is the property of the supplier until the first time it is used, at which point it is scanned onto the Speedboard enterprise resource planning system. This is a controlled process and at the end of each month we request an invoice for the reels that have been started.
Although these are predominantly ‘low value’ components, Speedboard never underestimates their worth in the bigger business picture. Regular reviews ensure we never run out of parts by monitoring historic consumption rates, forecasts of future work and up-to-date component lead times. This intelligence is used to ensure the optimum quantity of stock is on site to cope with any peaks in customer demands. Moreover, we also allow for occasions when reels of the same component are needed on all five SMT lines at the same time. Having multiple reels negates splitting them, which mitigates mistakes, reduces set-up times and allows for better stock accuracy.
For long lead-time items, specialist components not used on a regular basis and items used in final assembly, such as enclosures and cables, there are essentially two different scenarios.
Under the first scenario, the stock is owned by the supplier and kept on their premises, but reserved by Speedboard. If the components are destined for a customer that utilises a Kanban arrangement, we provide the supplier with the triggers to ship stock to Speedboard and to replenish used parts. If they will be used on a build-to-order project, we order as and when necessary in the knowledge that next day delivery will be available. Around 125 different components are reserved in this way and it is an ‘ever-green’ arrangement, which means we would need to notify the supplier if we no longer wished to reserve a particular component.
Under the second scenario, stock is located at Speedboard. This arrangement tends to be for specialist parts or relatively low consumption-rate items needed for build-to-order projects that may, for example, equate to 100 builds per month. Accordingly, if a pack size is 1,000 items, the supplier won’t want to reserve the pack for the best part of a year. Speedboard therefore buys the stock on behalf of its customer, whereby it is underwritten by them, and is managed by Speedboard on a min-max basis.
Final assembly is where a CEM can add real value and this is a particular Speedboard strength. Enclosures, for example, can be ordered in batches of 300 and underwritten by the customer. Speedboard maintains a buffer on-site, with the re-order trigger point being constantly monitored as this is governed by lead-times and the customer’s varying quantity requirements.
When customers underwrite components, it enables Speedboard to meet their production targets and ultimately reduce their stock liability and costs at the same time. Despite these advantages, however, the expense involved can make customers wary of commitment.
The peace of mind Speedboard aims to provide is that its buyers and account managers are knowledgeable and sensitive to all aspects of purchasing, including lead-times, component moisture sensitivity levels and supported component OEM pricing agreements. In other words, Speedboard can take on the buying responsibilities that customers might otherwise perform in-house for technical or cost reasons.
Managing excess stock
In other scenarios, Speedboard is appreciative of the fact that customers sometimes carry stock they wish to use up as quickly as possible. For instance, some customers have ended dual-sourcing arrangements to appoint Speedboard as their sole manufacturing partner. In doing so they typically end up with excess stock left over from the relationship with the other CEM. An effective process has therefore been introduced to manage and consume this stock. It is held in dedicated customer-specific locations within our stores and, unless reserved by the owner, appears on the ERP system as stock available for any customer.
Once a month Speedboard provides each customer with a report on their stock levels. They invoice us for the stock used, or we credit it against work we are doing for them. This arrangement frees up valuable storage space at the customer’s location and the excess stock, in which money is tied up, can be consumed quickly and painlessly.
In 2016, Speedboard benefited from improved processes and initiatives suggested by a new stores supervisor, appointed the previous year. The stores facility underwent a major overhaul, which included purchasing a new oven, drying cabinets, vacuum sealing machine and new air conditioning. A new taping and reeling machine was also installed, to ensure that as many components as possible are taped and reeled. This upfront effort reduces the risk of manual component handling, rather than transporting components to the pick and place machines, either loose, or in tubes.
For optimum efficiency, purchasing is managed within dedicated customer support teams, where each team has an account manager, a production engineer and a buyer. Each team is responsible for supporting several customers, with the allocation of customers to a team based on a variety of factors such as product complexity, assembly complexity and whether box-build or final assembly is required.
Operating customer support teams enables Speedboard to work more collaboratively with customers, as opposed to the traditional transactional approach to outsourcing. For instance, many customers include us early on in discussions about new product introductions so we can engage with design and production engineers to support and introduce cost reduction opportunities at the earliest stage. With sight of a preliminary bill of materials, well ahead of Gerber files, we can secure long lead-time items at good prices.
Since switching from traditional, transactional based outsourcing arrangements to more collaborative engagements with many customers, Speedboard is often treated as the customer’s ‘virtual shop floor’ and in many cases, is their sole manufacturing partner.
With such trust placed in us, our supply chain management must be second to none because in today’s economic climate, the supply chain cannot be taken for granted. Like any other part of a business, it must be subject to continuous improvement. From Speedboard’s perspective, its role in the supply chain is important because its processes can benefit both customers and suppliers alike.