OEM, ODM and EMS Supply Chain

How to Manage Schedule Changes

In order to limit conflict and reduce liability between the customer and manufacturer, it’s a good idea to resolve supply chain schedules prior to beginning the outsource arrangement. This protects both parties from unreasonable demands and/or liabilities that may arise from constraints.

It’s normal for product demands to rise and fall over time and a good inventory management strategy usually compensates for minor changes in demand for a product, but there are times when it becomes high priority to increase inventory in a hurry.

In order to prevent misunderstanding about what can be achieved and in what time frame it is sensible for customers to define with their ODM, OEM or EMS partner what changes are allowable and the proper time scales required to fulfil these volume increases. It’s not reasonable for the factory to carry high levels of inventory to enable rapid response to surges in demand, unless you’re paying for the storage and have paid for the goods in advance.

There’s also the possibility that a reduced market demand for a product will cause a need for rescheduling of the delivery on the balance of an order. This too can cause problems if the product is already partially complete or fully complete and is now to be held at the manufacturer until the client wishes to call off the rest of the order.

So both parties understand their responsibilities and what can be achieved under an outsourced manufacturing arrangement – it’s a good idea to construct a simple matrix for both parties to refer to when demand increases or falls substantially.

The four factors that you ideally want to consider are the number of days remaining before the shipping date on the PO, the percentage amount that the quantity can be raised in this period, the maximum percentage of the order than can be rescheduled at that point in time, and the maximum reasonable length of time that the rescheduling can be held for.

For example:

Number of Days prior to the shipping date on the PO

Maximum Additional Quantity that can be added to the order

Maximum percentage of order than can be rescheduled

Maximum rescheduling period

1 – 7

0

0

0

7 – 14

0

0

0

14 – 30

10%

10%

30 days

30 – 60

25%

20%

30 days

60 – 120

50%

25%

30 days

One of the advantages of working with an OEM/ODM/EMS management company is that they may be able to build additional flexibility into these arrangements by utilizing alternative suppliers in some or all of the supply chain prior to manufacturing. By understanding your product at a component level management companies can add significant value to your overall manufacturing processes without costing you more money.