How does an OEM with configurable products choose between the low-cost, but slow delivery of a supplier, say in China and the speed and flexibility of a higher cost supplier a few miles from its end customer? Can both suppliers coexist to deliver a best of both worlds scenario? Iron knows they can.
Iron's Postponement Planning and Design Services break down configurable product into its lowest configuration forms and separates where on the globe various stages of the configuration are most economically performed. This allows our customers to take advantage of low cost labor where it makes sense and use speed and flexibility when it matters.
As OEM companies push for competitive advantage, lower cost off-shore (primarily China) labor is one of the first avenues pursued and as long as they stand alone in their market with this labor cost advantage, the cost delta can off-set longer forecast horizons and the domestic SKU stocking required to address volatility in this longer horizon. In addition, the off-shore cost savings along with a reduction of domestic labor can off-set the additional shipping costs, travel and other support costs involved in managing an off-shore supplier. The problem comes when a competitor now starts to use the same low cost labor. The choice is then to follow the next low cost labor region trend and the risks associated or get more efficient in the region you are currently operating. The second option is where Iron Postponement comes in.
Iron Postponement Program Benefits:
Right from the beginning design phases, Iron is determining where on the globe product integration will occur, how labor is used and material supply flows. We identify how the unique product branding is applied and when. In low cost regions more labor intensive processes are weighed against material and tooling costs. For instance screws may be used in place of plastic snap in parts that require injection molding tooling. The reverse scenario could occur when using more expensive domestic labor. In addition the design will consider infrastructure for part commodities, handling intellectual property where patent law is respected and where component design registration resides. Iron works with our customers to developed intelligent Postponement design rules that factor in all the unique variables.
Reduction of Inventory and Increased Inventory Turns
It is well documented that Postponement programs reduce inventory levels. If final configuration is performed at an offshore facility, it is Iron's experience that as much as 40% less inventory will be needed to support the identical end-customer order fulfillment volumes. This results in greatly improved inventory turns.
To reduce the required stocking levels of configured product, some OEMs use air freight in an attempt Configure to order from their off shore vendor. Very few IT products have high enough volume or a small enough form factor to make this practical, so it is generally a very expensive path and not always a predictable lead-time.
When accurately comparing the (often hidden) costs of inventory and freight, it is rarely more expensive to perform final configuration domestically and gain an advantage of speed and flexibility over your competitors.
Since the forecast horizon must be extended to accommodate lead -times associated with managing offshore configuration, it is difficult to predict exactly what flavor of a product will actually sell at the time the OEM forecast is generated and provided to the offshore supplier. This time separation of supply to demand results in components physically assembled into non-selling configurations that could be used for configurations that are selling. What happens? To provide the speed and flexibility needed to support a customer, domestic labor is used to disassemble one configuration and create another. Further compromises are made to use up slow moving inventory and manage excess and obsolescence. Over time, a secondary, less controlled domestic operation is often created. Iron Postponement eliminates this challenge.
Intellectual Property Protection
As off-the-shelf technology has grown in importance for product development cycles, a significant portion of intellectual property now resides in software and custom PCBA's that are added to a base system. As stories about Cisco and other companies encountering intellectual property theft have emerged, it is clear that having this intellectual property handled at a facility in a country that does not respect patent and copyright law to the level of the US and Europe is a risk. Why take this risk if it is not necessary or a cost benefit? These elements of intellectual property are a natural fit for the domestic final assembly portion of Iron Postponement. Your intellectual property is safe with Iron.
Postponement is a real competitive advantage for OEM companies that use it, and Iron has all the tools and expertise to get you up and running quickly.