- Too much inventory
- High carrying costs
- Lead times
- PCN’s (Product Change Notification)
- EOL (End of Life) Notices
- Reduction of working capital
A manufacturer (OEM) of office equipment utilized a contract manufacturer (EMS) to produce their products. As is common with many contract manufacturing agreements, at the end of production any remaining excess inventory must be purchased by the OEM. In this case, the EMS approached the OEM with a $ 1M claim.
The OEM employed EDX’s Inventory Ownership solution to settle the excess inventory claim. Instead of the OEM purchasing the inventory EDX purchased the inventory from the EMS. EDX’s program allowed the OEM 3 years to consume the inventory and/or pay for the $ 1M inventory. Over this same 3 year period EDX’s program aggressively marketed and sold a portion of this excess claim to third parties. During this term, 100% of the recovery dollars from the sales were applied towards the OEM’s purchase commitment.
At the end of the 3 year term, the OEM calculated that, not only were they able to preserve their working capital by virtue of not having to purchase the claim themselves, they actually reduced their inventory claim by several hundred thousand dollars.
In conclusion, the main idea is to always have a plan, but to also have a plan for the plan. We have to accept the fact that issues will come up and uncertainties will stand in our way, but there is always a solution or temporary workaround out there to save the day. “Perfection is not attainable, but if we chase perfection we can catch excellence”. Question: What is your biggest supply chain issue?