Original equipment manufacturers (OEM) and electronic manufacturing service (EMS) providers rely heavily on factory direct and authorized distributors fulfilling orders and meeting business demands so that they can maintain the efficiency of their own operations. When lead time variability begins causing issues for supply chain management, it can lead to long lead times and reduced productivity for distributors, OEM, and EMS providers.
Some of the more common lead time variability problems that disrupt supply chain operations include:
- Constrained capacity at the factory;
- Short supply of precious metals; and
- Natural disasters forcing operations offline (hurricanes, earthquakes, tsunamis, etc.)
The impact these factors have on OEM and EMS performance is severe if authorized distributors are unable to process their buyer’s requests and deliver the needed components in time.
#1 Halts in Production Line
Long lead times can put an immediate halt on manufacturing operations if engineers lack the components needed to complete the project. Stopping the production line puts OEMs and EMS providers behind on completing customer requests, creating another situation of having limited stock. If a particular market experiences growth, and authorized distributors are unable to keep up with demand, it puts original equipment manufacturers behind on their production demand for customers.
Authorized distributors must operate under a highly efficient logistics management system to ensure scheduled orders are delivered on time and to the buyer’s satisfaction. Lead time variability issues can cause stock-outs and inventory shortages, forcing you to either find a more reliable parts supplier or complete a one-time order with an independent distributor just to refill your inventory.
#2 Unable to Generate Revenue
The more that manufacturing deadlines need to be extended, the greater the impact it can have on a bottom line. They may even find themselves spending more money to receive the parts from an unvetted independent distributor, so manufacturing projects can be finished and client orders are fulfilled, bringing in needed revenue. Lead time variability poses a real risk to the manufacturer’s profits if they are unable to complete order requests for their customers.
For example, many factories that make electronic components or silicon wafer fabs are based in Asia, which can be susceptible to natural disasters throughout the year like earthquakes and tsunamis. If a natural disaster occurs, and manufacturing facilities are offline, it becomes impossible to continue operations. Building plants could be shut down for weeks or even months.
#3 Contract Violations
Depending on the terms and conditions, some OEM and EMS providers could be fined for failing to perform contractual obligations. The aerospace and defense sectors will even sometimes apply contract fees. It’s important to review the outlined set of expectations for manufacturers that would account for any change of scope to normal services.
While certain lead time variability factors like transportation delays from bad weather or accidents cannot always be controlled, other issues like disorganized inventory and data entry mistakes fall on the distributor’s quality management system (QMS). If you are questioning your independent distributor’s quality assurance, audits can be performed to evaluate their process and operations and find where the problems are in their QMS.
Lead time variability can damage the reputation and supply chain when a product is virtually unavailable. Always know the right quality assurance questions to ask an independent distributor and don’t hesitate to reach out to their other clients and inquire if the distributor’s services satisfied their business demand.
At Sensible Micro, we are always improving the effectiveness of our quality system to help us meet our quality objectives and navigate each customer's unique supply chain issue. If we don’t have the components in our stock, we can search the open market for the components through our vetted supplier network. If we cannot locate the right part, then we will look for a replacement so you can continue working on your original manufacturing timeline. Every order processed by Sensible Micro goes through our IDEA-1010-STD visual inspection regardless of supplier.
By reducing long lead times through a successful sourcing network and quality system, we are committed to maintaining excellence in customer service, satisfaction, and order accuracy. If you have questions about our quality control or sourcing solutions for electronic components, contact us.
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