The Evolution of the Last Time Buy

Historically, it has been easy to look at the implementation of a last time buy as a mark of professional failure. While common practice and necessary to avoid a redesign or costly product discontinuation, the very act of admitting a last time buy is the optimal path forward represented an inability to properly forecast critical inventory needs ahead of time. The result of such an error? A stinging blow to your company’s stockpile of working capital.

Such an attitude is, of course, nonsense, as there are a nearly infinite number of factors in place that could trigger a last time buy date on the OCM side — very few of which can be influenced by anything an OEM customer does. The feeling, however, is very real, and the stigma associated with a last time buy has led the action to be viewed as a last resort, not as a natural progression of an OEM product’s life cycle. As a result, too many manufacturers neglected to implement a standard process capable of handling them consistently.

“In recent years, as companies have become leaner and try to do more with less, there has been less specialization in purchasing,” writes James Carbone of Source Today. “Buyers at many companies are responsible for sourcing and managing multiple commodities.” This consolidation of roles highlights how last time buys were long-viewed in the production process: out of sight and out of mind until the last possible moment.

What is interesting, however, is how rapid technological advancements across the electronic landscape are quickly re-evaluating this status quo. The insatiable demand for smaller, faster, more efficient electronics has had a particularly powerful effect on component manufacturers, who must routinely optimize and upgrade their products to compete. This has led to an ever-widening mismatch between the life cycle of an OEM product and the components that support it. Many industries, such as healthcare and telecommunications, operate on extended product life cycles as long as 25 years. In extreme cases, such as in the aerospace industry, components are obsoleted before the product even launches! When the critical electronic inventory required to complete these life cycles only remains in production for five-to-seven years, equipment manufacturers are forced to take a more proactive approach to last time buys – or force themselves to operate at significant financial risk.

One area that has seen marketable improvement in the last time buy process is defined role segmentation. Where last time buys were once a broad responsibility handed by whoever pulled the short straw, supply chain professionals now are encouraged – and hired – to specialize in this very specific niche.

“There has been a steady increase in LTB buyers,” says an electronics distributor CEO to Source Today. “That never even used to be a title 10 years ago. Now there are people in-house specializing in that particular sliver of a need.” The demands of the marketplace have necessitated a new discipline, and it reflects how last time buys have quickly become not a last resort, but an expected and standardized procedure.

Another rising trend related to manufactures is a newfound concept of shared responsibility. As we transition from a regional economy into a global economy – where supply chains commonly source components, store inventory, and assemble products across oceans to take advantage of affordable labor and tax incentives – many OEMs have had no choice but to adopt a less-centralized business model that hinges on the earned trust of external partners, such as EMS providers or more specialized supply chain partners. Among the many responsibilities being delegated to these partners include last time buys. Quite often, these partners have a much more direct line to suppliers, and can more efficiently confirm the life cycle status of components in question. In some cases, agreements can even be made that allow these partners to initiate last time buys on the OEM’s behalf with significant benefits.

For the foreseeable future, we expect this movement within the manufacturing industry to only continue as more OEMs learn to understand last time buys not as a hindrance that could have been avoided, but as a necessary – and even vital — tool in their supply chain arsenal.

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