Going Beyond Last Time Buys: A New Way of Thinking in Today’s Market
Last time buys have typically been viewed as a last resort, an option that only becomes viable when there is no other option for preserving the lifecycle of your product. Recent market developments in the past year, however, have changed that. Most recently, for example, OEMs are mitigating the impact that the coronavirus is having and will continue to have on supply chains. In a recent survey by IPC, 84% of respondents said that they are concerned about the impact of the coronavirus on their operations. On average, respondents said they expect to see delays of at least five weeks and as high as nine weeks.
This is only the most recent crisis that has had a significant effect on the electronics manufacturing market, but as the market continually moves toward a more globalized structure with multiple touch points and increased interdependence, it should be expected that such disruptions will only become more common. Knowing this, a change in strategy might be needed to better account for the unexpected and enable manufacturers to operate unimpeded by variables beyond their control.
Last time buys are the answer. Instead of being viewed as a last resort, last time buys represent manufacturers’ best option for mitigating disruption. If the lifecycle of the product is known in advance — or if the OEM has a long-term service agreement that mandates regular maintenance of their product — and it is already expected that the lifecycle of a component will not be long enough to match it, then last time buys can ensure that the electronic component will be on hand without the need to consult the gray market. Additionally, last time buys act as a counter against price inflation, locking in today’s market price upfront (often with a significant bulk purchase discount). They also enable manufacturers to avoid any future fluctuations caused by shortages or increased demand.
Last time buys provide benefits on the component manufacturer side as well. If their customers have the means to commit to their inventory upfront, then that enables them to obsolete components sooner. As a result, they can expand their consumer base while keeping current consumers satisfied with a “softer landing” from obsolescence.
The roadblocks to implementing last time buys on the front end of the development process, however, are significant and need to be addressed. For example, last time buys require on-hand capital to complete such a large bulk purchase, which is traditionally limited due to other initiatives. They also require adequate storage space and procedures necessary to keep components in optimal condition for a long period of time. In order for an OEM to execute a new last time buy strategy, both of these points require significant time and resources, or the aid of a third-party solution provider such as Partstat, to overcome.Partstat’s Last Time Buy Solution addresses both of these concerns. For more information on how last time buys can become a valuable strategy in your organization, read about the Partstat Last Time Buy Solution here.