With increasingly sophisticated supply chain planning tools and methodologies, OEMs continue to evolve their outsourcing models in an effort to maintain and improve profitability. In doing so, they’ve transferred an increasing amount of material ownership to their subcontracting CM partners. These added responsibilities for production inventory, while somewhat beneficial for spend aggregation and driving pricing negotiations, have slowly eroded what are already minimal operating margins due to the imperfect world of demand planning. Ultimately, the Contract Manufacturer is assuming more and more inventory liability; adversely affecting quarterly earnings results based on required monthly accruals. Additionally, Sarbanes Oxley has legislated restrictions on how companies can report these liabilities; thus further constraining options for cost mitigation
To effectively counter the impact of this growing "lean manufacturing" discipline, EMS companies have to capitalize on cost savings opportunities to attain revenue generation goals and insulate profit margins. Classic’s Material Cost Reduction program helps leading manufacturing organizations leverage their purchasing power by managing a small percentage allocation of total spend to drive incremental cost savings through a safe and reliable channel; while preserving vital existing Vendor relationships.Our global network, combined with our unsurpassed Quality practices, assures that our customers can confidently execute these types of programs to augment their core business strategy for enhanced margin creation.