Lower Inventory Carry Costs Case Study: Last Time Buy

Case Study

Lower Inventory Carry Costs Case Study: Last Time Buy

A prominent medical device manufacturer (OEM) contracted a well-known component manufacturer (OCM) to develop and produce an ASIC for use in the production of its medical devices. The contract period was reaching its end; consequently, through an End of Life notice, the OCM announced a Last Time Buy (LTB). The OEM utilizes contract manufacturing companies (EMS) for its production. The OEM and the EMS debated who would be responsible for the $3M purchase of the components. The purchase represented enough components for the 5 year forecast of production. Neither party wanted to spend the capital for the purchase and/or carry the inventory on their books. Some other distributors offered to hold the inventory; however, their 12 month offering wasn’t nearly long enough considering the production forecast of 5 years.

Through the EDX Inventory Ownership Solution, we provided purchase order administration and purchased the entire forecasted quantity and provided a 5 year delivery schedule. The process was simple. The OEM and EDX entered into a Supply Agreement. The cost of the program was simply rolled into each part price. Best of all, the OEM did not have to purchase the parts directly; they instructed their EMS to purchase the parts on the agreed upon 5 year schedule.

The OEM computed that EDX’s Program actually saved them money considering their own cost of capital and the extra infrastructure needed to properly inventory the components. The OEM was able to preserve their working capital, lower inventory carrying costs, secure inventory for years of future production and lock in the component costs for the duration of their production.

EDX’s Inventory Ownership Solutions improves the working capital positions of our customers while reducing annual inventory carrying costs by as much as 50%.

EDX will purchase, own, warehouse and fulfill inventory anywhere in the world for a period of up to 10 years.

  • Preserves working capital
  • Saves inventory carrying costs
  • Allows cash flow budgeting over multiple years
  • Eliminates lead time
  • Guarantees the cost of the components over multiple years
  • Secures the inventory for production and service over multiple years
  • Protects quality by avoiding open-market buys- counterfeit prevention

Purchasing Services
Purchase Order administration

Accounting services
Invoicing and AR for OEM designees (EMS,CM)

Warehousing Services
Physical receiving, inspection, storage
Administration, audits
Insurance payment (EDX asset)
Tax payment (EDX asset)
Maintenance of warehouse ISO/AS9120A and security protocols

Worldwide Shipping Services
Picking, packing, shipping
Export administration
Freight administration
Distribution to OEM designee(s)

Electronic Component Handling Services
Maintain ESD and MSL level processes and protocols
Break manufacturer packaging consistent with JEDEC standards
Re-baking of MSL components consistent with JEDEC standards
Coordination advanced inspection and testing: solder, electrical, functional

Reporting Services
Monthly or Quarterly reports monitoring consumption
Alerts for over-consumption or under-consumption

Component Manufacturer Liaison Services
Warranty administration
RMA administration
Coordinate failure analysis requests

Excess Inventory Disposition Services
If your forecasted usage changes EDX‘s well established distribution channels can assist in selling excess inventory. During the agreement term 100% of proceeds go to offset supply agreement commitment.

BOM Vitality Reports
Real-time tracking of 25 million components

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