EOL Last Time Buys: The Link Between Contract Manufacturers and OEMs
There are few issues that cause more friction between OEMs and their contract manufacturers than last time buys. Although last time buys are often necessary to ensure the lifecycle of the OEM product, the protocol for the last time buy, or who holds responsibility for the last time buy, is often murky at best.
For both parties, the very prospect of a last time buy is labeled as an inconvenience — especially in a time where an externality such as the coronavirus makes on-hand working capital even more of a precious resource. Contract manufacturers already operate on remarkably slim margins, while OEMs in the face of an unexpected disruption need to place a premium on working capital just to ensure payroll is met. If neither party is willing to eat the upfront cost of a last time buy, the negotiations could take weeks, even months. By the time the issue is resolved, it is not uncommon for the contract manufacturer to have no choice but to initiate a product redesign at even greater cost to the OEM partner.
What is needed is a solution that establishes clear, established roles for each applicable party when a critical electronic component approaches obsolescence. Partstat’s EOL Last Time Buy Solutions offer this by acting as the cog that allows both parties to move forward with minimal friction.
Here’s how it works: the moment the contract manufacturer becomes aware of impending obsolescence, they immediately notify the OEM partner that a last time buy is impending. However, instead of leaving the OEM to shoulder the full brunt of the last time buy, the contract manufacturer can refer the OEM to Partstat, who will manage the rest of the last time buy process from there.
By allowing Partstat to take control of the last time buy process, neither the contract manufacturer nor the OEM need to be concerned about tying up working capital, because Partstat uses its own working capital to make the purchase. By relying on Partstat, the OEM will be able to:
1. Avoid the potential added costs of a redesign.
2. Move forward by investing in the next project, rather than sacrificing additional resources on the current one.
3. Store all last time buy inventory off-site in an industry-leading storage facility with full packing and shipping capabilities.
4. Cement their relationships with contract manufacturers and ensure solid, long-lasting partnerships.
Contract manufacturers, on the other hand, will not be placed in a position that requires them to squeeze their already narrow margins. In fact, they will be placed in a position of trust and respect by their OEM partner, who will know that regardless of the obsolescence issues before them, their contract manufacturer has their best interests at heart.
No other solution on the market offers so many benefits for all parties, not the least of which is peace of mind in the face of impending obsolescence. Working capital is precious, and contract manufacturers and OEMs today both require a strategy that preserves it.