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EMS manufacturing metric: Materials work-in-progress (WIP) percent raw materials

Value-add included for WIP at each stage of operations. Reported on various levels: corporate, customer, program family, board level.

By Mark Zetter

Materials cost of goods sold (MCOGs) is the EMS PCB assembly manufacturer’s largest cost, second only to indirect labor, which is typically hidden among the EMS provider’s S,G&A.

EMS providers want to use the inventory turns metric to show their materials management prowess in managing MCOGs. But inventory turns are easily, and often, manipulated and do little to convey how EMS providers are at managing raw materials once inside, across operations.

Depending on the quarter, if you look at Jabil’s or Flex’s inventory, analysts must be scratching their heads asking themselves why is inventory so poorly managed in an industry that says MCOGs is so important? (SEE: How to drive cost out of your manufacturing product portfolio)

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I believe EMS CEOs have been managing EMS business wrong all of these years because industry did not know any better and didn’t have the right tools. EMS industry is not known for innovative, outside-the-box thinking.

USD WIP (% raw materials)

Foxconn, Flex, Jabil, Celestica and others talk inventory turns all day. But it would be more insightful for prospective customers, current customers, and investors if EMS firms breakout the dollar value for materials work-in-process, or work in progress (WIP) across corporate, or the operation, as: USD WIP (% raw materials).

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