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Introduction
This case study highlights SIG Sourcing’s 10+ year product stocking program in support of its customer’s Mexico factories. By supplying both custom-designed and off-the-shelf electronics for use in the customer’s manufacturing lines, SIG enabled its customer to garner the benefits of just-in-time delivery while avoiding potential risks associated with direct overseas sourcing.
Background
The OEM, a major player in the commercial lighting industry, operates several factories in Nuevo Leon, Mexico. The factories required a reliable supply of small electronic products and assemblies to maintain production schedules to build larger luminaires.
The OEM faced challenges in managing the supply chain from Asia, including long lead times, inventory holding costs, potential tariff impacts, and the complexity of international logistics.
Solution: SIG Sourcing's Stocking Program
SIG Sourcing developed a comprehensive stocking program tailored to the OEM's needs. The program included the following components:
Diverse SKU Management: SIG Sourcing stocks over 20 SKUs, including both custom-designed and off-the-shelf electronic assemblies, ensuring a broad range of parts readily available to meet the OEM’s production demands. The SKUs ranged from simple brackets and connectors to full box-build PCBAs.
Asian Manufacturing and Direct Shipping: Under SIG’s purview, products are manufactured in Asia and shipped via ocean container to the west coast of Mexico, then trucked directly to a third-party logistics (3PL) warehouse in Nueva Leon. This streamlined logistics process reduces lead times and minimizes environmental impact by delivering goods directly to the region where they are consumed.
3PL Warehouse and Local Distribution: The use of a 3PL warehouse allows for efficient storage and distribution, supplying components to two of the OEM's factories in the area. This setup ensures quick response times and aligns with the OEM's just-in-time manufacturing approach while maintaining up to two months of safety stock locally.
Benefits to the OEM
Just-in-Time Delivery: The stocking program enables the OEM to benefit from just-in-time delivery, reducing inventory costs and enhancing production efficiency without the risks associated with direct international orders.
Local Safety Stock: SIG maintains two months of inventory at the 3PL.
Tariff Avoidance: By managing the supply chain through SIG Sourcing's program, the OEM avoids Section 301 tariffs, significantly reducing costs associated with importing components directly from Asia.
Environmental Efficiency: Direct full container load (FCL) ocean shipments to Mexico minimize transportation distances and reduce the carbon footprint associated with logistics, supporting the OEM’s sustainability initiatives.
Risk Mitigation: SIG Sourcing acts as a buffer between the OEM and Asian suppliers, managing potential risks such as quality issues, shipping delays, and currency fluctuations.
Results
SIG Sourcing's stocking program has delivered substantial benefits to the OEM, including:
Increased Production Efficiency: Consistent and reliable component availability has allowed the OEM to maintain steady production schedules, reducing downtime and improving operational efficiency.
Cost Savings: The avoidance of tariffs and reduction in inventory holding costs have contributed to significant financial savings for the OEM, enhancing profitability.
Enhanced Flexibility: The ability to quickly adjust orders and inventory levels based on production needs has provided the OEM with greater flexibility to respond to market demands.
Conclusion
SIG Sourcing's strategic stocking program has proven to be a vital asset for the Fortune 1000 OEM’s Mexico factories. By providing a reliable supply chain solution that combines just-in-time delivery with cost savings and risk mitigation, SIG Sourcing has enabled the OEM to optimize its manufacturing processes and strengthen its competitive position in the commercial lighting industry. This case study underscores the importance of innovative supply chain strategies in achieving business success in today's dynamic global market.
Learn more here or email info@sigsourcing.com to discuss a custom manufacturing and logistics program for your company.
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