Purchasing is a differentiator at this small EMS provider
By Staff -- Purchasing, 11/2/2006 7:00:00 AM
Anyone looking for a good example of how purchasing can drive business success should look to NPI Services, Costa Mesa, Calif. At that electronics manufacturing services (EMS) provider, the skill of its buyers has become one of the company's unique selling propositions.
NPI Services builds prototype boards for telecommunications, aerospace, medical and automotive OEMs, says Judy Greenspon, president and founder of the company. It has annual sales of about $5 million.
“Our customers range from venture funded startups with a minimal staff to highly integrated public corporations that have all the bells and whistles of a contemporary supply chain management operation,” she says.
“Our business is building prototype boards. A customer can give us a Gerber file,” says Greenspon. A Gerber file contains all the necessary information about the board's design. “Within five days they get a fully built prototype back in their lap,” she says.
The prototype is used to test an OEM's application specific integrated circuits (ASICs) and new circuitry. The board goes though the OEM's software, electromagnetic interference (EMI) and stress tests.
Many EMS companies can build prototype models. What sets NPI Services apart is the role of the buyers. NPI Services' buyers review the cost of the parts on the board and forecast what the board will cost six to 12 months in the future. Buyers purchase parts for prototype builds from distributors, including Avnet and Arrow. “However, when we do production costing, then we tap into direct suppliers,” says Greenspon.
Buyers cost out the product using cost-modeling the company developed. “We have created some macro formulas internally and we forecast where the market will be six months to a year down the road,” she says.
She says sometimes an OEM will want several cost scenarios for a board. For instance, an OEM may want to know if it changed a regulator circuit on the board, what the cost impact would be, she says.
Greenspon says costing out a board helps differentiate NPI services from other companies that do prototype builds.
NPI Services' business is all small volumes. The company uses large distributors for its parts that offer a wide selection of products. Because it buys in small volumes, the company doesn't feel the need to drive down costs or allow a vendor to manage its inventory. Its biggest purchasing issue is delivery. It needs parts fast because it turns around customer orders for prototypes in five days. Because its volumes are so small, the distributors generally have no problem delivering on time.
“We build anywhere from one to 500 pieces and 80% of our business is 20 pieces or less,” says Greenspon. Typically six months after NPI Services delivers a prototype printed circuit board assembly to an OEM, the board will go into volume production, but NPI won't handle it.
Greenspon acknowledges her business is specialized and she is not interested in volume production. “I think that sets us apart from other solutions in the market.”
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