Component Sense Blog

Is your CMS or EMS managing your Excess and Obsolete stock effectively?

Is your CMS or EMS managing your Excess and Obsolete stock effectively?

When you outsource your manufacturing you typically pass over control of your inventory to the Electronic Manufacturing Services (EMS) Company. In doing so, you have also passed the responsibility of managing your E&O over to them too. Many outsourcing contracts will state 'we will use best endeavours to mitigate your E&O liability'. Do you find yourself questioning whether or not they really are using their best endeavours?

The EMS will typically pass around a list to brokers without sense checking the data and without properly populating the manufacturers part numbers. Often, they are concerned only with creating the impression of mitigating your liability rather than actually helping you. Remember, an EMS will not take a loss on your stock. You will normally be liable for the cost plus the EMS margin at some point in time. The best return for the EMS comes from you, not a broker that needs to undercut the market and make a margin. The EMS will also normally be charging you storage costs so it can suit them to hang on to it until the buy back and often beyond if the storage fees are significant.

In comparison, when we buy from an OEM they tend to understand that we cannot pay above the market price and understand our need for a modest margin. We usually set the expectation with our OEM customers of around 60% of cost price for a sensible return. This cannot happen when we are assisting an EMS that wants 100% of an inflated price (the margin they charge you for buying the stock). Without the margin no EMS will give the process any manpower.

When we work with EMS companies we first need to find out what stock (brand and Manufacturers part number) is actually on the shelf. Most have no idea what they have in stock as their MRP system doesn't care what is on the shelf as long as it meets the specification and is on the AVL (Approved Vendors List). To help us identify the saleable product we implement our InPlantTM system so that we can catalogue the stock properly. We also encourage them to get agreement up front from the stock owner to accept a reduction in cost so that we can build in a margin for the EMS.

We can help you even if your stock is held in the warehouse of your subcontractor. Many companies are asking us to install our InPlantTM system into their CEM, CMS or EMS providers warehouse. We can set up in a matter of days in any location you choose, anywhere in the World.

We are an Independent Distributor. Why not allow us to start advertising your stock by simply supplying us with photos of the top 10 items with clear images of the manufacturers labels and we can start marketing your stock immediately.


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