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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: rich evans who wrote (3327)	4/13/2001 5:26:14 PM
From: Gottfried	Read Replies (1) \| Respond to of 23153

Thanks Rich. Now I'm interested in reading more about EMS companies. Gottfried

To: rich evans who wrote (3327)	4/13/2001 8:17:45 PM
From: CommanderCricket	Read Replies (1) \| Respond to of 23153

Rich, "Their margins are small and they take no inventory risk" Your right about thin margins but they have to take inventory risk. A contract manufacturer has no choice but to have a steady supply chain. Your comment is a misconception that makes the current situation so tragic. Most believed that the EMS folks were different, they had IT systems in place, could better manager inventory than an OEM and could better leverage the suppliers. All of the above is plain, flat out false. The only difference between an OEM and a EMS provider is that they manufacture products for many OEM's and are able to keep the SMT lines going when one customer's orders drop off. The last several years created a situation where pressure from the OEM's and other EMS competitors forced a company like Jabil to procure a pipeline of product to assure supply. This was and is inventory. Lots of it. Your statement that an OEM is responsible for inventory and in most cases risk sharing agreements are in place, however, when business is going 100 MPH, Jabil and others had to place orders ahead of the curve just to meet demand. When business slowed last fall, Jabil and other were sitting on more supply than can billed back to an OEM. Solectron and Cisco are a perfect example. Solectron states they have 4.5 billion dollars in inventory and are nogotiating with Cisco. Inventory in this business is like real estate, possession in 9/10th of the life. Solectron will eat it the majority of it (along with the suppliers).