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Liability metrics for OEM electronics supply chains

By Mark Zetter

Supply chain management liability becomes more complex when companies outsource to a contract manufacturer. (Search EMS  provider company listings)

Extended supply chains emphasize the need for executives to understand how to profit from global operations and how to leverage the knowledge associated with the added depth and wider scope.

Below are just a few of the many supply chain liability indicators and metrics executives should consider when evaluating and managing the performance of extended supply chains or, global operations. (Click here for EMS financial and due diligence information)


On-time delivery

  • to request
  • to commit


Order fulfillment lead time

  • customer signature/authorization to order receipt
  • order receipt to order entry complete
  • order entry complete to start manufacture
  • start manufacture to order complete manufacture
  • order Complete Manufacture to Customer Receipt
  • customer receipt to field/installation complete


Upside production flexibility

  • material
  • labor
  • capacity (note current/ongoing capacity utilization)


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Total supply chain management costs

  • order management cost
  • material acquisition / purchasing cost
  • inventory carrying cost
  • supply chain related finance and planning costs
  • supply chain related information technology costs


Cash-to-cash cycle time (cash conversion cycle)

  • days of inventory – raw, WIP, finished goods inventory (FGI)
  • days sales outstanding
  • days payables outstanding


Forecast accuracy

  • unit forecast accuracy
  • dollar forecast accuracy


Material returns

  • returns processing cost as % product revenue
  • returns inventory status
  • return cycle times
    • cycle time to process excess product returns for resale, days
    • cycle time to process obsolete and end of life (EOL) product returns for disposal (in days)
    • cycle time to repair or refurbish returns (reverse logistics) for Use (in days)
  • percent actual achievement versus published contract service agreement cycle time (in %)
  • # of repairs performed as % total # units shipped annually
  • # of repairs performed internally (OEM) as a % total # repairs performed
  • # of Repairs performed by the contractd manufacturer as a % of total # repairs Performed
  • Cost of units repaired or refurbished internally as a % of total
  • Cost of units repaired or refurbished by the contract manufacturer as a % of total


Financial metrics

  • profitability (EBIT) as % of revenue
  • expenses (SG&A) as % of revenue
  • cost of good sold (COGs) as % of revenue
  • sales growth (year over year change)
  • COGS year over year change
  • net asset turns offers a free service to OEMs to help expand your options when learning about/sourcing electronics services. Speak with a Provider Advisor toll-free at (888) 860-1193.

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