Dreamstime Images
Dreamstime L 175825718 5ee8f45e0a4f7

The Value of Good Inventory Management During Times of Uncertainty

June 16, 2020
How good inventory management helps electronics OEMs and contract manufacturers streamline their supply chains and give their buyers more time for strategic planning.

Managing inventory in the electronics supply chain is no easy task. Ordering, stocking, retrieving, shipping and accounting for products across numerous departments and locations all require a well-thought-out, orchestrated approach that incorporates people, processes and technology. Add the speed of e-commerce and the rigors of omni-channel to the mix, and the situation only becomes more complex.

For electronics buyers, industry fragmentation presents yet another hurdle on the road to good inventory management. In other words, it’s a critical process for some companies, but one that’s largely “left up to chance” for others. Somewhere in between, the typical organization adopts a half-baked approach to the management of its electronics parts and components.

This puts extreme pressure on the electronics buyer, who often winds up spending an inordinate amount of time tracking down orders, doing tactical sourcing, expediting orders and putting out daily fires instead of focusing on more strategic moves. In the absence of a robust inventory management strategy, this cycle of work can literally be never-ending.

Taking a Strategic Viewpoint

Tied up in the day-to-day responsibilities of ensuring that their internal customers have the parts, supplies and components they need to be able to do their jobs, procurement professionals rarely get a chance to take a “big picture” view of their supply chain processes, nor do they have time to come up with long-term fixes to their most pressing issues.

Buyers are also challenged when they can’t find the inventory when they need it. In fact, this is often the number-one challenge of inventory management, and particularly when it comes to hard-to-find and obsolete parts. And even when they do have the parts inventory in-house to complete the related projects, buyers also have to be constantly thinking about how to get any unused inventory off their books in a way that maximizes return on investment (ROI).

It’s also not uncommon to see buyers working with unreliable demand forecasts. Where in a perfect world everyone knows exactly what they need—and when and where they need it—making these predictions can be difficult in today’s fast-moving business environment. The subsection of contract manufacturing that’s focused on quick turnaround work, for instance, relies heavily on just-in-time deliveries of electronics components and parts to get its own work done. When forecasts are incorrect, entire assembly lines can be impacted.

4 Moves to Make Now

The good news is that there are solutions to these problems. Here are four steps that all buyers can take to start solving these issues and shoring up their own inventory management approaches:

  1. Open up the lines of communication. OEMs and contractor manufacturers should be transparent about their potential demand requirements with their trusted group of suppliers. The more open they are, and the more information they provide, the more streamlined the supply chain will be. Even if you don’t have a lot of information to share, simply taking the time to talk to these valued suppliers about your needs can go a long way in helping to create a more successful inventory management strategy. 
  2. Explore your alternatives. Having alternate sources of supply—a requirement that was brought to light recently during both the trade wars and the COVID-19 crisis—is mandatory in today’s uncertain environment. Talk to your electronics distributors about these options, and let them know what you’re willing to accept as substitutes. Those suppliers may be able to substitute other brands in instances where the pricing is better—something that can’t happen if your bill of materials (BOM) is locked, and if you’re unwilling to explore the alternatives. 
  3. Increase inventory visibility. A popular buzzword right now, visibility gives buyers insights into what they have in stock, what they need for the foreseeable future, and any gaps that lie between those two ends of the spectrum. When you know what you have, what you need, and what projects are both underway and in the planning stages, you can work with suppliers to help manage the inventory process, make changes to delivery schedules and ensure that the right product is in the right place at the right time. 
  4. Move excess stock off the books. You can use different avenues to move excess stock out of your stockroom and off the books, including consigning the inventory to a partner to resell it for you, or just sell it as excess. The ultimate goal should be to close the loop on the inventory management process once your projects are completed, then reallocate those resources to new projects.

In return for making these four moves, electronics buyers can expect smoother supply chains, better inventory predictability and more successful projects. Other key benefits include less money tied up in inventory (one of the biggest expenses for any product-oriented company), time savings and the ability to buffer any supply chain fluctuations as they occur.