Partstat Last Time Buy Solution vs. Standard Last Time BuyBy Logan Wamsley
Since its launch, we here at Partstat have worked diligently to highlight the many benefits our Last Time Solution can have for an OEM and the other companies that make up their supply chain. But while we can reference these benefits in many different ways (case studies, videos, hypothetical scenarios, etc.), without a baseline to compare our solution to, it can be somewhat difficult to establish exactly how much better its incorporation could really be.
To rectify this, let’s lay out what a standard last time buy looks like for the prototypical OEM.
Upon receiving a PCN for an end-of-life electronic component, the OEM then must immediately set in motion their established obsolescence management strategy, which usually involves placing an order to acquire the inventory necessary to see the life cycle of their product through. Keep in mind, this situation is based on several key assumptions; for, example, we must assume that the last time buy date on the PCN is within a reasonable amount of time to negotiate such a transaction. Otherwise, the OEM will have to consider other, less ideal alternatives such as third-party vendors who rely on significant markups for profit.
We must also assume that the OEM has a suitable infrastructure in place to warehouse the components in question, as well as the capability to fulfill them as needed on an established schedule. Moisture-sensitive components, for example, such as raw wafer and die necessary for the assembly of ASICs, require specialized equipment that provides strict humidity controls.
These are issues that are rendered moot through our Last Time Buy Solution, but for the sake of comparing apples-to-apples, let’s assume that these variables are appropriately accounted for, and the standard last time buy functions as the OEM intends.
Below, let’s briefly discuss, point by point, how a Partstat Last Time Solution stacks up against a standard last time buy:
Last time buys cannot be purchased on a payment plan, so when an OEM makes the decision to acquire the necessary inventory, they must accept that those funds will be taken out of the working capital saved for that quarter. The reasoning for why one may do this is simple: although that working capital is lost in the present, it will eventually come back in the revenue generated from their products. “You have to spend money to make money,” as the saying goes; by maneuvering around working capital losses in the present, you are betting that it will pay off in the long run.
Quite often this is true, but only to a point. This concept is based on the assumptions that A. the consumer base for the product remains intact, and B. no additional supply chain disruptions occur that will prevent this consumer base from seeing the product. Until the minute your product is in the consumer’s hands, the components within that product represent tied up working capital that could have been used in a variety of other beneficial ways. If your company has any aspirations for hiring new professionals, implementing new training procedures, or entering new markets, on-hand working capital makes that possible.
What our Last Time Buy Solution does is put those options back into play for our customers. Instead of resorting to sacrificing your own working capital in the name of potential long-term success, we buy your last time buy inventory for you, using our capital. All those aspirations for innovating and growing no longer have to wait five, seven, or 10 years; our solution gives you the tools to act now.
A common misconception regarding the warehousing of electronic components is that once a component is in an environment owned by the OEM, it costs the OEM virtually nothing to maintain it (again, this assumes they are in possession of an infrastructure suitable for carrying the electronic components in question).
In fact, the opposite is true. Not only does the storage of such components come at a cost, it’s actually quite expensive. Factoring in all the numerous variables associated with properly warehousing inventory (staff wages, electricity costs, equipment investments, testing costs, packaging, etc.), annual carrying costs can be as high as 30 percent of the component’s original value! If your priority as an OEM is to continue to innovate within your industry, accepting such a significant blow to your bottom line can be a difficult pill to swallow.
As a supply chain partner, Partstat is not burdened by the need to juggle priorities as OEMs are forced to do. Our product is our solution, and by using economies of scale in our favor, we have found a way to significantly reduce these costs on behalf of our customers without compromising quality.
Not only do we maintain ISO:9001 and AS9120 certifications, as well as a dedicated staff with extensive training in inspection, ESD, and MSL packaging protocols, we also offer Partstat customers the option of storing sensitive, high-value critical inventory in a climate-controlled vault chamber rated “best in class” for electronic component storage. And we can offer all of this while saving OEMs an average of 42 percent in annual carrying costs.
For the sake of argument, let’s now assume that the OEM does not have the infrastructure (or the working capital to invest in such an infrastructure) suitable to store the inventory they purchased. In this case, it becomes necessary to look for other options. Many of these supply chain partners, however, have to this point failed to offer services their customers need to ensure long-term business continuity.
Authorized distributors are one such alternative, commonly offering to store customer inventory for up to 12 months. While this may be sufficient for an OEM product with a limited life cycle, a product with a five, 10, or even 15-year life cycle makes a 12-month storage limit, at best, a temporary solution. 12 months later, the OEM will be forced to solve the exact same problem.
One of Partstat’s most distinctive qualities is the ability to store and fulfill electronic inventory for up to 10 years — a feat still unmatched in the supply chain industry. Obviously, such an option has enormous benefits for the OEM in terms of guaranteed business continuity. From the day Partstat purchases the last time inventory on your behalf, you can have peace of mind that your inventory will remain safe, secure, and ready to ship in one location for as long as you need.
The comparison between a Partstat Last Time Buy Solution and a standard last time buy is honestly hardly a comparison at all. From every possible angle, the benefits of our solution simply outshine even what the world’s most accomplished OEMs can accomplish through their own supply chain network.
So, when determining the proper course of action for your next last time buy, don’t ask yourself if a Last Time Buy Solution is right for your company – you already know the answer! Instead, ask yourself what your company intends to accomplish with your preserved working capital!
For a brief summary of the highlights of our Last Time Buy Solution, check out the cool infographic below: