MOQller just had an article titled, “A Circular Supply Chain: Better for Your Business and Our Planet” published at EMS Now, a news source for the electronics manufacturing services industry. Here’s a snippet from the article. Enjoy!
To be competitive, businesses aim to be more agile and efficient, limit loss, and eliminate e-waste. But how do they get there? The answer may lie in shifting away from outmoded processes that result in wasted time and inventory. Operating with a leaner supply chain model is more cost-effective for the EMS and sustainable for the environment. But achieving it requires an innovative solution to the plague of excess inventory — specifically, a circular supply chain.
With a circular supply chain, businesses reallocate useful new inventory for a productive purpose, breaking the traditional model of “take, make, and throw away the excess.”
Causes and Consequences of Excess Inventory
Ideally, your business would get exactly what it needs to meet production goals, with no shortage or waste. Unfortunately, a number of factors result in surplus parts. One is that suppliers often demand substantial lead times, typically measured in months. Sometimes market needs change, and the forecasts based on past performance prove inaccurate (e.g. Apple iPhone production forecasts cut by 50% last year). Even if your business can accurately estimate exactly how many pieces it requires, it often is forced to order far more than it will use because of the supplier mandated MOQ (minimum order quantity).
circular supply chain warehouse
The resulting excess inventory is a drain on your resources, tying up finances, storage space, and manpower. Also, the longer you keep the unused supply, the more likely it is to depreciate in value or even become altogether unsellable. At that stage, it becomes known as E&O (excess & obsolete). Gregory Tashjian, Managing Partner, Inventory Management Partners, LLC, observed here that “between 5 percent and 20 percent of electronic components end up in the E&O category.”
That amounts to significant losses, because businesses typically recoup only up to 5 percent of their purchase price when reselling E&O components. Sometimes, they are not sold as whole components but broken down to salvage any remaining scrap value. However, as The Global E-waste Monitor 2017 points out, it is unusual to recover all of the value of these metals, because they are “easily lost due to imperfect separation and treatment processes.”
A more serious problem is that the excess electronics and their component parts end up as e-waste in landfills, posing a serious threat to the planet. We’re now on a course to hit “52.2 million metric tonnes, or 6.8 kg/inh, by 2021” (Global E-waste Monitor 2017). According to a report published by the World Economic Forum, if e-waste is not curbed, it will reach “120 million tonnes annually” by 2050. Only 20 percent of that is likely to be safely recycled, as most recycling processes fall short of environmental standards.
Businesses that adopt the new solutions enabled by digital transformation will have a game-changing competitive advantage over those that remain stuck in the old model of a linear supply chain. With the help of digital technology, those with excess inventory due to the suppliers’ MOQ can now list the surplus for sale early in the procurement process, maximizing agility and responsiveness, preserving inventory value, and eliminating e-waste and warehousing costs. That’s a major benefit both for businesses and the planet.
