Why Does Partstat Offer OEMs Up to 10 Years of Last Time Buy Inventory Fulfillment?
The production of an electronic component largely mirrors that of any other commodity – and as such, it rests on the changing winds of consumer demand.
If there are many products that require the same component for extended lengths of time, and it makes financial sense for the OCM to continue production of that component for their OEM customers, then, of course, they will continue to do so. But inevitably, the production cycle must run its course – often to the detriment of a sizable list of clients who count on that component being available at the time of assembly.
As every component is different, every component will have a different reason why its continued production would not be profitable. These reasons range from the mundane to the catastrophic, including:
• Supply and demand has simply shifted out of the product’s favor. If a low sales volume is no longer enough to cover the manufacturing costs, then it’s time for the OCM to phase the component out of production. If the product is expensive to craft, the loss of even a few buyers might be enough to push a component toward obsolescence.
• The market for the component has become too niche to maintain a profit. Sometimes an OCM will design a part with a wide spectrum of applications, but OEM engineers neglect to take advantage, thus stunting the OCM’s original projections for rapid growth.
• If a manufacturer is experiencing financial hardship, it may decide to exit several markets (even profitable ones) to concentrate on its core competencies.
• Innovation from competing manufacturers has decreased the OCM’s market share below sustainability. This is particularly common in electronic component markets, where consumer demand for smaller, faster components with low power consumption grows by the day.
• Political instability, natural disasters, or “acts of God” have forced the OCM to close vital production facilities.
Any of these factors will prompt an OEM to negotiate a last time buy as part of their obsolescence management strategy. The issue, however, is that many of these factors (such as the OCM exiting the market or a natural disaster) are impossible to predict or fully account for. They could occur late in a product life cycle – in which case a last time buy for one or two years of inventory should be sufficient – but it could also occur very early on.
If this is the case, the OEM would be required to not only spend the required working capital to acquire the LTB inventory, but also to store and fulfill it for however long is necessary. Most OCMs do not have the resources to offer long-term LTB fulfillment, and authorized distributors will usually not hold it for more than 12 months. The only option is for the OEM to store and fulfill the LTB inventory on their own dime, using their own resources. Not only is this expensive, but many OEMs do not have the infrastructure to safely handle particularly sensitive inventory such as ASICs. If such procedures are taken for granted, vital LTB inventory the OEM just spent years of working capital on risks degradation before it is even needed!
Partstat’s ability to purchase, store, and fulfill last time buy inventory for up to ten years makes all of these concerns non-issues. Not all products will require 10 years of storage and fulfillment, but that substantial leeway grants most OEMs peace of mind when preparing to make a last time buy. If an act of God necessitates a last time buy for inventory to support eight or nine years of a product’s life cycle, for example, our Last Time Buy Solution ensures that there’s nothing preventing your product from meeting and exceeding consumer expectations for as long as you wish to continue supporting it.
Up to 10 years of storage and fulfillment of last time buy inventory – all without spending any upfront working capital. That is Partstat’s promise, and OEMs around the world are discovering how valuable such a promise can be.
How long does your company typically store and fulfill last time buy inventory?