SCI: A builder behind build-to-order
By Staff -- Purchasing, 4/22/1999
Encouraged by the success of Dell Computer, many PC companies have embraced the build-to-order business model. Rather than building computers, stocking them, and shipping them when orders come in, PC companies are building boxes only after they have orders. The result is lower inventory levels, less overhead, and higher margins.While Dell has popularized BTO, contract manufacturers have been doing build-to-order for years. In fact SCI Systems in Huntsville, Ala., the largest contract manufacturer in the world, builds computer systems for Dell, Compaq, IBM, and Hewlett-Packard as well as medical telecommunications, industrial control, automotive, and consumer electronic OEMs.
"We have done build-to-order since 1992," says Bill Quinn, vice president of procurement. "We do a lot of product for build-to-order PC companies. It's common for us to build the entire system for the PC companies, but we do multiple levels of business with all the PC companies." In some cases, SCI will build just a board for a PC company.
"If you go into one of the kiosks at Circuit City, you can configure a computer for yourself. That order might come directly to SCI and be manufactured here," he says.
Quicker is better
With BTO, time is of the essence. As SCI started to do BTO, the need to shrink procurement cycle time increased, so SCI began automating the purchasing process by doing more electronic data interchange with suppliers. SCI's 200 buyers worldwide in 35 locations are linked with suppliers through a proprietary EDI software system.
When SCI receives a customer order, the bill of materials for the order is loaded into SCI's system. "Say there's a requirement for 10,000 64-megabit drams. A planner gets a requisition for it in his queue. When he approves it, the form goes to the company's mainframe which looks up a corporate contract and then sends an order against the contract to the supplier," he says. But if there is a problem-- if the leadtime is too long, for example--it requires a buyer's intervention to find another source of supply.
"Nine years ago when you had a paper requisition sent by the plant to central purchasing, it was logged in by a clerk. The time to handle the requisition was measured in weeks rather than hours," he says. "Now there's no paper anymore. All of our purchases are electronic," says Quinn.
SCI's next step to reduce procurement cycle time and inventory is its supplier-managed inventory program, which recently was implemented at a Guadalajara, Mexico, plant and will likely be rolled out to other sites. Under the program, suppliers ship parts to a nearby hub operated by a third-party logistics provider. When SCI needs parts, they are shipped from the hub. SCI does not own the parts until they are shipped and essentially the only inventory it has will be what's on the production line.
"This is going to dramatically increase our inventory turns," he says.
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