Materials Management

In recent years much has been written about the idea of core competencies, which are the particular strengths of a company that provide its fundamental basis for adding unique value. The thesis is that a company never has more than a few such competencies, and that it should engage only in those activities where its competencies are at or near the top.

Among the requirements for manufacturing excellence are superior competence in production and superior competence in materials. Although everyone agrees that the activities of production and the activities of materials go hand in hand, the ironic twist of business reality is that few companies enjoy high competence in both production and materials.

In fact, in most middle market organizations the requirements of production almost always trump the requirements of materials. After all, the unrelenting day-after-day pressures are to meet a production quota or to fill an urgent customer order. As these pressures mount, the organizational mantra becomes one of meeting those requirements at almost any cost. And thus materials are expedited at twice the standard unit cost, and the materials group soon concludes that the daily pain of not having enough of the right material is far worse than the month end pain of negative PPV and too much inventory.

Before long the materials organization is in disarray, and, with most of its controls having been compromised, its principal role becomes one of reacting quickly and effectively to the crisis of the moment. In that circumstance, it’s the company that’s the big loser, with scarce capital held captive in unnecessary inventory, higher materials costs, inefficient production, lost orders and customers, and suboptimal sales and profits.

Yet few alternatives are available to companies that find their materials operations in disarray. Most simply resolve to do better, typically by changing management personnel, tightening procedures, installing new and more “robust” systems, or some combination of these and similar initiatives. Yet, for many, the embedded cultural primacy of production over materials will again assume the dominate role, thereby erasing hard won progress and reigniting the downward spiral.

Alternately, many middle market customers solve their materials problems by outsourcing their manufacturing operations to the electronic manufacturing services (EMS) industry. Although this is a good and lasting solution for most such customers, for those who can legitimately list production among their core competencies, this approach is the equivalent of throwing out the baby with the bathwater.

In this event, the obvious solution is to outsource materials management while maintaining the company’s core production operations. This conquers the cultural impasse by establishing countervailing authorities for production and materials, thereby strengthening the company’s manufacturing operation with the elusive and powerful benefit of core competence in both production and materials.

Regrettably, however, the outsourcing industry forces its customers to march down a one-way street named “all or nothing”, wherein customers are more than welcome to outsource their manufacturing requirements, but never just their materials requirements.

The notable exception is AMI, which offers middle market customers a full menu of expert and stand alone electronic materials services. These services include and range from sourcing and kitting to complete materials management, which can encompass on-site warehouse operations. This latter service carries with it the superior benefit of eliminating the customer’s raw materials inventory, since materials ownership does not transfer — and the invoicing process is not triggered — until AMI delivers the material to its customer’s production floor.

Just as AMI is customized for the middle market, its comprehensive service portfolio and its flexible approach enable the company to customize itself for each customer. Thus, most of AMI’s materials management engagements commence with a selection from its sourcing and kitting services, and then expand over time to encompass the full spectrum of materials management services. Alternately, and especially for emerging companies, AMI can help jump-start customer success by launching a complete complement of materials services as the initial step in the overall engagement.

AMI, with its unique portfolio of electronic materials services, is the right size and the best choice for the EMS middle market.