Tioga’s managing director, Warwick Adams, explains how strong client and supplier partnerships are helping the CEM manage the dual challenges of costs and parts availability
Managing costs and parts availability in the current electronics arena has become the main focus of a CEM’s day-to-day life. The emphasis is to check on all parts required to fulfil orders or part ship. Has there been an update from the supplier? Have they suddenly become available from another supplier? What price are they against our quoted cost? Which client is screaming the loudest: the list goes on. We are being reactive to clients, feeding them hand-to-mouth and efficiencies have gone out of the window.
On the plus side, once stock is checked in, the NPI process validated and kits released to the shop floor, this is a seamless journey through manufacturing and onto shipment. Whether it be a full kit or part shipment, this part of the journey is now the easy bit. The whole process is totally driven by stock availability.
As we moved into the 2019/2020 crisis, Tioga held an abundance of stock for all clients whom it has partnered and enjoyed a stable relationship with over many years. Realising the seriousness, the company pushed for orders to secure more stock. However, as time passed without light at the end of the tunnel, stock was gradually used and not replenished. Having to secure stock of non-problem parts ready for when allocated parts arrive has now pushed stock to a record high. The added frustration of component manufacturers increasing prices up to 20 per cent, implementing MOQs and being non-scheduled and non-cancellable has added fuel to the fire.
Moving forward, as partners we now work together to find and secure the stock, cost is agreed at the time of shipping to Tioga and then agreed when invoicing the client. All RFQs requested are ballpark and when placed they are re-assessed at the point of shipping, if the values differ dramatically the client is kept informed and always has an involvement.
At the moment, controlling spiralling costs is a CEM’s single most challenging job. To cover energy, haulage and inflation we’ve increased our running costs slightly, something we haven’t done for many years and has been kept to a minimum.
The reality is that clients and suppliers need to be a strong partnership, communicate well and work together to share the burden of stock levels, increased costs and shipping products in a reasonable timescale. Giving an honest and true reflection of forecasts helps the CEM understand requirements. Placing orders well into the future helps secure the business. However, we also need to ensure we haven’t over committed, ending up with high value stock when the market changes and prices start to fall: if they ever do.
Warwick Adams concluded: “Tioga is committed to its clients. The industry is still frustrating and will continue into 2023. That said, a recent customer survey showed very positive results, confirming we are doing a great job. Thank you to all our people who are helping us ride this storm.”