Procurement Management at

High Mix Low Volume EMS Industry

© Enics
1 Group
 Challenges of
Define
High Mix Low Volume
Procurement Management

Analyze Demand and Supply Model

Strategy Strategic Procurement

Procurement
Management at High
Mix Low Volume
EMS Industry
Plan Procurement Planning

Control Supplier Management

 Challenges of High Mix Low Volume
Procurement Management

Procurement
Core
Sourcing Procurement
Team Material Buyer Project Commodity Demand
Manager Manager Manager
SQ
Manager
Logistic
Manager
DSCM
Manager
Planner Buyer Sourcing
Officer

1 2 3 4 5
Supplier
Demand Strategic Operational Logistic
Quality
Management Procurement Procurement Management
Management

1. STRATEGY Gate 2. TACTICS Gate 3. COMMITMENT Gate

ƒ Low interests from suppliers; ƒ Demand Changes and Forecast ƒ High supplier DPPM
ƒ Low volume Vs. High Quality Fluctuation; ƒ Not cooperate from suppliers
Requirement; ƒ MOQ, MPQ leads to inventory excess ƒ Different understanding on quality
ƒ NRE Cost Vs Procurement Value; and obsolete; requirements
ƒ Customer Contracted Vs. EMS ƒ Difficult to automate procurement, ƒ Hard to proceed quality claim
Contracted; and items sleeping in system
ƒ Customer Preferred Vs. EMS ƒ First time buy is last time buy?
Preferred; ƒ Quote in Model A, Plan in Model B,
ƒ Possible bigger supplier base and Result in Model C;
numbers of specific components
 Challenges of High Mix Low
Volume Procurement Management
Cost Reduction &
Supply Availability
Supplier
Operational Management
Procurement
Strategic
Procurement

Price Cost TCO Procurement

Management

Focus: • Right Supplier Base • Supply Availability • Product Quality

• Cost Competitiveness • Supply Cycle • On Time Delivery
• Supply Capability • Inventory Management • Soft Competence
• Logistic Model • Sub-Supplier Management

Levers: • Human Resource • Customer Forecast • Product Quality Criteria

- Product Knowledge Accuracy • SPE/SPR in place?
- Marketer • Procurement Planning? • Stop problem at supplier
- Location • Supply Model Ready site?
- Experience - SMI, SMC, DFF • Constant supplier
• Supplier Resource - Risk Management process audit and
- Willingness with same - Supplier Integration verification?
roadmap? • Procurement Parameter • Financial Data Analysis?
- Right price and time? • Inventory Management
- Find Service Provider? - DOS Setup
- Local or localization? - Agreed Buffer Stock
- Life Cycle Model? - Safety Stock
- Standard Supplier
Verification Process
• Modeling and
Simulating
• Supplier Integration
 Challenges of
Define High Mix Low Volume
Procurement Management

ƒ Business Case Analysis

Analyze Demand and Supply Model ƒ Demand and Supply Modelling
ƒ Forecasting Your Future

Strategy Strategic Procurement

Procurement
Plan Procurement Planning Management at High
Mix Low Volume
EMS Industry

Control Supplier Management

 Important ElementsBusiness Case
of Demand Models Analysis
Basic Element

Volume
Customer
Requests

Cash to Cash
MOQ
Through
Put Time

Supplier Product
Base Mixture
EBIT
Supply
Models Demand
Model

Supplier
Logistic
Lead Time
BOM
Cost
 Business Case Analysis
Basic Analysis

Modelling can
point out which
improvements
would have
biggest effect
Supply
Demand Model Cash
Model To Logistic
Cash Model
• Payment Request • Supply Base Understanding • AP AR Analysis • Duties and CCC Control
• Delivery Term Request • Supplier Relationship • Inventory Analysis • RMA Cycle Time
• Logistic Model • Components Analysis - FG and Semi • Inbound and Outbound
• Consolidation of spend - Critical, Specific, Single - WIP • Boned Manual
• Purchasing power - Longest Lead Time - Components • Test Equipment
Handling
• Agreement structure • Procurement Model - Best Possible DOS
• Transfer Management
• Supply Model - Lead Time Procurement - Full Volume
• Product Structure - SMI, SMC, JMC Simulation
• Manufacturing Process • Inventory Analysis - Short Volume
& Through Put Time - ABC Analysis Simulation
- MOQ/MPQ; MOQ/EAU
- DOS Plan
- Risk Simulation
 Demand and Supply Modeling
1. Find out (and challenge!)

CUSTOMER‘S RESPONSE TIME

REQUIREMENT FROM ORDER

Replenish-
Customer Forecast / Inventory level driven To-Order
C
U
Ship-To-Order
2. Choose
the model Assembly-To-Order S
Make-To-Order T
Procure-To-Order / Buy-To-Order O
Engineer-To-Order M
PLAN E
SOURCE
Supplier Integration
MAKE DELIVER R
Manufacturing Logistics team
Team
3. Understand the capabilities
(Component LT’s & flexibility, Through Put Time, Delivery Options etc.)

Location of strategic buffer

 Forecasting Your Future

Material Cost Forecast

• Price Tracking System
• Components price forecasting and market intelligence
• Define ‘Quoted’ , ‘Average’ and ‘Latest’ prices
• Price coverage
• BOM Deviation
• Purchase Price Variation
HMLV increases the complexity. Serving
• Materials Cost Forecast
HMLV is all about complexity reduction
• Material Margin Forecast through structures?
Material Supply Forecast
• Supply Market Intelligence
• Supply Risk Prevision
• Supply Base Analysis
• Procurement Planning

© Enics Group
 Challenges of
Define High Mix Low Volume
Procurement Management

Analyze Demand and Supply Model

Strategy Strategic Procurement

Procurement
Plan Procurement Planning Management at High
Mix Low Volume
EMS Industry

Control Supplier Management

 Strategic Procurement
Factors of Strategic Procurement in Negative - Sustained Negative Influence
Warning - Negative Trend Indicated
Optimized – Valid Positive
Excellent - Sustained Positive

High Mix Low Volume Industry EMS On Track - Positive Trend Indicated

On Track On Track
On Track On Track
Optimized Optimized
Warning Optimized Warning Optimized Warning Warning

Negati Excellent Negati Excellen

Negati Excellent Negati Excellent t
ve ve
ve ve

Human Resource Labor Cost and OH Raw Material For-ex

On Track On Track On Track On Track

Warning Optimized Warning Optimized Warning Warning Optimized
Optimized

Negative Excellent Negative Excellent Negati Negative Excellent

ve Excellent

Competition Willingness Technology Life Cycle Care

On Track On Track
On Track On Track
Warning
Warning Optimized Warning Optimized Warning Optimized Optimized

Negative Excellent Negative Excellent Negative Excellent Negative Excellen

t

QMS Financial Status Logistic Capability Order Fulfillment

© Enics Group
 Challenges of
Define High Mix Low Volume
Procurement Management
Procurement
Management at High
Mix Low Volume
Analyze Demand and Supply Model EMS Industry

Strategy Strategic Procurement ƒ Customer Demand Analysis

ƒ Material Procurement Plan and
Inventory Management
ƒ Materials and Product Cost
Management
Plan Procurement Planning ƒ Increase and Decrease, Which
One is Devil?
ƒ OBS and Excess, whose
mistake?
ƒ 20 Must-Know Questions to
Control Supplier Management Your Material Procurement Plan
 If you know your future,
invest in planning. If you
don’t, invest in structure”
Procurement Planning

Customer Demand Analysis

• Forecast accuracy Vs Supplier OTD;
• Demand fluctuation cycle Vs Longest Lead Time;

Materials Procurement Plan and Inventory

Management
• Plan what customer demand does not cover;
• Optimize procurement parameter;
• Risk Prevision Model;
• Set target for major action and measurement;
• MRP…
 Procurement Planning
Material and Product Cost Management
• Monthly Material Cost and Material Margin Forecast;
• Proactive action in sourcing and procurement;
• Plan cost reduction plan base on forecast;

Increase and Decrease, which one is devil?

• No accurate forecast…;
• Align with your supplier to reduce the risk from demand changes;
• Always benefit from common components and right suppliers;
• Always prepare on specific components;

OBS and Excess, whose mistake?

• Wrong supplier from beginning;
• Wrong MOQ from beginning;
• Wrong demand running in system;
 Procurement Planning

20 Must-Know Questions to Material Procurement Plan

1. ABC Setup rightly?

2. Timely check settled buffer and safety stock?
3. Is your total inventory forecasted and planed monthly?
4. How is your demand fluctuation cycle and rescheduling
frequency?
5. Items ITO lower than 3, improvement plan?
6. What is the current supplier SMI and SMC value, and what
can be the max.? How to achieve?
7. How do you want to plan your common parts inside SMI and
SMC agreement?
8. Strategic and critical Components Control shall be in place.
(Long lead time, single source…)
9. Demand decrease simulation model need to be in place
10. Demand increase simulation model need to be in place
 Procurement Planning

20 Must-Know Questions to Material Procurement Plan

11. Lead time change management.
12. What is your procurement proposal before Chinese New
year, Summer Holiday, and Peak Season?
13. How about the total buffer and safety stock settled level,
timely reviewed?
14. What is your targeted or planed components stock DOS?
15. How about your current MOQ/MPQ, MOQ Vs. 90 days
demand/3?
16. PO 30, 45, 60 days value Vs. demand 30, 45, 60 days value;
17. Open purchase order without demand;
18. Stock value without demand;
19. Sleeping components in your system.
20. Half year No-Demand from customer side.
 Challenges of
Define High Mix Low Volume
Procurement Management

Analyze Demand and Supply Model

Procurement
Management at High
Mix Low Volume
Strategy Strategic Procurement EMS Industry

Plan Procurement Planning

ƒ Supplier Performance
Control Supplier Management Evaluation
ƒ Supplier Integration and
Relationship Management
 Supplier Management

Supplier Performance Evaluation

• Do not only focus on Top value suppliers;
• Many specific and small value suppliers are also important;
• Classify suppliers and schedule SPE;
• Use data more than feeling;
• Lead and drive other functions contributing for supplier
performance evaluation;
• Manufacturers’ process quality management and audit
program shall be in place;
• Supplier On-Time-Delivery, measure what you need;
• Do not despite the single area Non-compliance;
• Suppliers’ focus on Environmental and Social issues.
 Supplier Management
Supplier Integration and Relationship Management
• Supplier Relationship Management
- Motivate suppliers to consider you as preferred or strategic customer;
- Develop with plan and target;
- Well communication on a win-win roadmap;
- Find the ones who can grow with you in same way;
- Partnering better than a constant competition;
- Partnering the one who is partnering you…;
- Manage the difference in different regions;
- Global management of suppliers;
- Proactive in keeping number of suppliers low;
- Build escalation system with your suppliers
• Supplier Changes and Integration
- Change suppliers ONLY by a good reason;
- Change suppliers with a good plan;
- Develop supplier more than changes;
- Integrate always start from common and overlap;
- Lean your supplier base then lean your org.;
- Integration shall create more efficient competition, not lose it.
• Localization
- Not all the local suppliers are best contributors;
- Centralize and decentralize both needed;
Thank You