Many OEM’s have difficulty determining the necessary demand, allowing them to plan for product availability, to fulfill the end user’s needs in short order. Some customers and programs have a combination of predictability with variation in demand, while others provide little awareness and require the ability to produce product quickly for their fulfillment. These challenges leave an OEM in a position of risk between winning business and that of the carrying costs of inventory.
Versa Electronics approach to these challenges has developed over many years of varied engagements and has the ultimate foundation in our partnership approach to supplier-client relationships. In this case, the communication and history between Versa and our customer is conducted at a high level and allows for mutual confidence between needs and responses. The critical communication includes ongoing personal peer to peer communication as well as the established communication provided via purchase orders and contracts.
A global OEM of point-of-sale solutions has a model providing both standard products and user customizable products. Their business requirements include a range of demand characteristics in terms of planning ability, volume and turn times. In the case of their standard products, there is an opportunity for long-term planning, but also the need for quantity and turn time flexibility. On the other hand, customizable products may call for planned assembly and more likely those of drop-in, quick turn fulfillment.
This OEM’s scope includes a total of 29 different assemblies, of which roughly half are active within a given period, and average 44,000 units annually. In this case, the 80/20 rule shows itself in that 83% of the customer’s total build volumes are consumed by 17% of their active programs. In the case of the 17% driving volumes, blanket PO’s are utilized to provide the combined demand of planned monthly release and material readiness for regular drop-in requirements.
“Design for” feedback is well demonstrated here. This OEM has done a good job in engineering helping the product breadth’s lifecycle. The relativity is that their practice includes designing new products from a common library as much as possible. The results we encourage allow for leverage of demand and forecast on a large percentage of their total BOM. With this Versa can reduce the risk on the balance of 83% of the active programs further by evaluating material and supply chain challenges and addressing them on an individual basis via demand support programs such as bonding, safety stocks and the like. Now, the other 83% of the variable demand programs are able to be produced in short lead times with little or no formal visibility.
Our partnership with this long-term client results in a valued cost basis across the line while providing drop-in or upside readiness, with “4 week or less” and “6 to 8 weeks” turns, depending on the program’s complexities and build levels. This proves the win-win-win from supply to contract to OEM that we’re all looking for. If partnering with your CM, having a strong relationship and great communication is a foundation of your needs, you can achieve what this OEM’s Versa program manager calls, “service, service, service”.