In the EMS industry, particularly in the sub-$50 million annualized revenue range, resources and borrowing power are limited. Materials typically represent more than 70% of unit cost. Excess inventory, unnecessary transactions and a lengthy supply chain pipeline can limit a company's ability to invest in the technology or increased capacity needed to grow the business. Conversely, taking a Lean approach to supply chain management reduces inventory and enables fewer workers to support a growing enterprise. Less floor space is required. Financial resources can be focused on investments, which attract additional business. Highly visible kanbans ensure the impact of demand variations on available raw material is quickly addressed. An additional benefit of this Lean approach is the development of true supplier partners. The level of organization present in an enterprise that is holistically Lean makes a strong business case for extending those practices within the supply chain. Suppliers aren't asked to make changes that are bad for business. Instead they are asked to support a system that is inherently more efficient. As the EMS provider they support grows, so does their business. In this EMS provider's case, the journey began with customer rationalization. A motto in this industry is "you can't do good business with a bad customer." It speaks to the point that customers that don't fit the business model often drive consumption of non-value-added time and resources. The lesson to be learned from both a customer and EMS provider perspective is EMS providers have a difficult time being all things to all customers. The broader the business focus, the more difficult it can be to implement Lean systems. While a more focused approach may seem exclusionary, the reality is it frees "bad fit" customers to find a contractor whose model is a good fit, and it provides "good fit" customers with the responsiveness and quality that come with an efficient business model. Embracing a holistic approach to Lean saves money, reduces overhead personnel, frees floor space, enhances throughput and improves financial metrics. The example illustrated above demonstrates how that savings can be refo-cused into growth momentum.
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