Does your company’s stocking system look like your grandmother’s?
One hundred years ago our great grandmothers stocked up for the winter by canning, pickling, and drying foods to last until spring. Today we preserve mostly as a hobby and buy groceries and such only when we need them. Why lay out the cash and fill up a pantry with items you will not need for months? Instead buy what you need just in time to use it!
Currently we are faced with the identical options in the electronics industry: buy large quantities for lower prices and safety stock benefits, or order only what is required to meet the production schedule. The former ties up cash flow, fills floor space with unused goods, requires additional insurance, and mandates environmental controls. The latter requires attention to scheduling lead time and often a higher price.
How best to balance the advantages and disadvantages? Is there a source with all the benefits and none of the losses?
(I would not have written this if I did not already know the answer!)
Yes indeed; you could
- cut your inventory cash investment by 50%+,
- Repurpose your inventory space for manufacturing,
- reduce your burden,
- respond faster to your customers’ demands,
- and still save money.
At USTEK Inc. we calculate the customer’s price based on the annual volume. Then we build a portion of that estimate ( typically 3 to 4 months ) and hold it in our Ohio stock for kanban/just-in-time requirements. Releases received by 1 PM are shipped the same day. Examples of the savings:
A large 4-layer printed circuit board used in quantities of 100 pcs per run was priced at $18.22 each. When this went on our kanban stocking program the customer’s price dropped to $13.80. This saved the them 24% in piece price and 90% in inventory expense. A fabricated metal part had been quoted at $2.89 for a single 1500 piece order but dropped to only $1.22 for the 12k piece kanban release order. Piece price savings of 58% and an inventory decrease of 87%.
The cost reductions will vary with your component type and the volume – so send us your design files and specifications and we’ll get to work demonstrating your savings!