As part of its Total Component Management (TCM) supply chain offering, Paragon Electronic Components has enhanced its Vendor Managed Inventory (VMI) warehousing solution, which provides line-side access to components, potentially reducing operational cost and complexity to boost long-term productivity. The system is uniquely based around complete bills of material and unlike many VMI offerings, the Paragon line-side store can include all items on the BoM and customers only pay for what they have used rather than being charged for full reel or pack quantities.
Paragons line-side feed remote warehousing solution locates materials at customer premises in an assembly-ready or machine-ready format. Providing customers with instant access to components, the unique system is founded on the principle that all stock belongs to Paragon – customers only pay for stock as it is used. The result is a substantially improved cash flow and overall stock reduction. Paragons VMI system also allows customers to report material usage in terms of product or BoM, rather than on an individual component basis. This significantly reduces the administrative burden on the shop floor and simplifies invoice processing.
Paragons Managing Director Graham Smith uses a real customer example to illustrate how VMI works in practice: At one of our VMI sites our customer manufactures communications systems for use in a range of high integrity applications. They have an extensive product portfolio with over 100 different product types while batch quantities are usually small. Working to very short lead times; quick turnarounds are essential during changeover. Our line-side store enables this customer to have over 1500 parts available, on-site, as consigned stock but they are only invoiced when they use them. Our sophisticated forecasting capabilities enable us to replenish stocks efficiently during consolidated weekly consignment deliveries, further reducing handling requirements. And, even better, when demand is low, we can also prepare custom-quantity reels to save the customer unnecessary expense. The overall effect is one of streamlining; the customer has a faster, more efficient production environment, which is reflected in their bottom line.
Delivered through VMI, Paragons line-side stores are controlled by setting minimum or maximum levels for the specific factory location on its ERP system, reinforced by an in-depth forecast build system. A daily replenishment programme identifies when stock is likely to fall below the minimum threshold or where an unusual increase in build forecast necessitates extra stock. The system is supported by buffer stocks held in the Paragon warehouse, plus protected inventory at the companys suppliers. Each week, customers inform the Paragon team of which PCBAs have been manufactured. The Paragon system then calculates the components used, amends stock accordingly and invoices the customer. For additional flexibility, customers can also check stock levels of parts held in the line-side store via the Customer Zone on the Paragon website.