1. ManEx Minute - 372008 - AVL Management
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INSPIRATIONS

"Things turn out best for those who make the best of the way things turn out."

-Jack Buck
Issue 372008  

Greetings,

For this issue, we address the challenge of properly managing Approved Manufacturers in the Item Master.

Please click the "ManEx Case Solution" link for the method recommended by ManEx.

As always, We look forward to your participation and feedback as you gain new insights and become a more effective provider of Electronic Manufacturing Services.

Sincerely,

David Sharp
ManEx, Inc.
Business Case - Inventory Control
Comprehensive AVL Management
Until recently North Eastern Company* (N.E. Company) has focused primarily on consignment work. They are pushing to gain more turnkey business and are having success but also discovering the challenges of managing the complex AVL requirements inherent to turnkey work.

When parts are provided by the customer, the biggest challenges are ensuring there are enough and that those parts are not used for the wrong customer. Now they must follow AVL restrictions and maximize their buying power, while minimizing their inventory. Inefficient purchasing can increase purchasing and material costs, and tie up cash in inventory that could be used on other jobs.
What is the best way to consolidate inventory? How can they ensure that they only place approved manufacturers on a given BoM? How can they make their purchasing process more streamlined to reduce the number of purchase orders to manage?
Business Case Solutions
  1. Use Manufacturer Part Numbers- Creating one internal part for each manufacturer part number can facilitate using excess inventory where possible. However, this method will either make the BoM unnecessarily long (i.e. a separate part number for each manufacturer part number), or require outside tracking to maintain the AVL, and additional work to update the BoM each time a change in Manufacturer Part number is required.

  2. Use Customer Part Numbers- Using the customers part number as the internal part number, or creating an internal part number for each customer's part number will make it much easier to manage the customer's AVL and ensure production is using only approved parts. It also makes it easier to see the on hand value of inventory for a given customer. However, depending on commonality between customers, it can reduce buying power and make it difficult to use excess inventory readily available while decreasing overall buying power.

  3. Use Combined Part Numbers- using one internal part number for multiple manufacturer, supplier, and customer part numbers maximizes buying power, reduces total number of part numbers in the system, facilitates easier consumption of excess inventory where possible, and allows for detailed control to ensure only the approved parts are used in production. However, if not setup properly, it can increase handling time, and make it more difficult to trace liabilities.

* Company name has been changed.

ManEx Case Solution
Make YOUR Mark

Here is a list of upcoming topics. Please email your thoughts, comments, and suggestions to mym@manex.com

  1. PO Notes
  2. Part Shortage Tracking
  3. MRP by BOM
  4. Excess Inventory

If you have any topics you would like to see addresses in future newsletters, please send them to topics@manex.com.
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1.1. ManEx Solution - 372008 - AVL Management


ManEx Case Solution
 
ManEx recommends evaluating the specific situation and using a combination of: one internal part number for multiple customer and manufacturer part numbers, and one internal part number for each customer part number.  This will facilitate the highest level of control and visibility while maximizing buying power and minimizing inventory, where possible.
 
After careful evaluation, NE Company discovered they could easily separate their components into three groups: unique, common and inexpensive, and common and expensive. This enabled them to establish a strategy appropriate to each group and get the maximum benefit out of the system.
 
For components unique to the customer (such as circuit boards and custom fabs and ICs) they created one internal part number for each customer part number and used the customer part number as the internal part number.  This made it easy to identify unique parts and handle them accordingly.
 
For components that were common and inexpensive, they created an internal part number for each customer part number but used an internal part number instead of the customer's part number for tracking.  This provides flexibility to place the component in the next group should the need arise in the future.  (This group also included low volume parts that were very unlikely to reach purchase minimums needed for a price break).
 
For components that were common and expensive, they created one internal part number for multiple manufacturer and customer part numbers.  This way they increased the likelihood of reaching the next price break, reduced excess inventory, increased visibility of available inventory across multiple jobs, and allowed MRP to more fully manage those parts thereby reducing the negative impact on cash flow.