The Critical Balance of Supply and Inventory Control

Estimated reading time: 2 minutes

Can you still design a product and expect to see validation by the next week? The Epoch International Enterprises team of Meghan Zou, Foad Ghalili, Lillian Lin, and Crystal Zhang provide insight into what their distributors have up against over the past two years as they seek to source and validate parts. Often, it means finding alternatives, redesigning the project, and worst of all, sitting and waiting.

Nolan Johnson: With the current global component supply challenges, we want to better understand how your firm manages the validation of inbound inventory. With so many shortages and additional vendors, it is more possible that counterfeits slide in. How you handle that?

Meghan Zou: The situation has worsened since last year. We are trying to build some inventory as safety stock. On the other hand, we want to manage the inventory and secure a stable supply chain.

We are classifying our components to various risk levels and managing them accordingly. If the supply situation looks risky, we will tag it in our system and keep our stock levels a little higher on those components. We must make sure that all components are real, otherwise it will impact the quality we sell to customers.

First, we ensure the components come from our regular established distributors, who help validate the parts. But one distributor might not have enough of what we need, so we are trying to diversify, not put all our eggs in one basket. We have identified several key distributors globally, but even those distributors might be having supply issues.

We support procurement in our facilities, both in Dalian, China, and in Fremont, California. Over the past 20 years, we have established our own purchasing network. We use reliable suppliers on even small batch components. First, we verify by the data code (DC). If the DC is too old, we go through an inspection process to test the components, verifying whether the component can be used in our assembly.

Even for small suppliers, we choose the reliable ones. All the component purchases come from an authorized vendor list (AVL), which has been certified and validated by both our purchasing and SQM teams. Every component goes through component validation by quality, engineering, processes engineers, and production before it is used.

Johnson: Meghan, are you testing every component?

Zou: Every lot, especially if the DC is over two years old, needs to be verified as to whether it can work. It also depends on our procurement rules, especially for brand new vendors.

Lillian Lin: We have validation for those new vendor situations.

Zou: When we have a purchase from a new vendor, we go through a sample evaluation process.

Foad Ghalili: Do you get samples for validation before you get it from them? How does it happen?

Zou: Actually, we confirm it through two processes. First, the vendors bring in a small lot, and do the test themselves. They need to give us their certificate, the guarantee letter stating we can use it without any quality issues. Second, when we have the goods in hand, we test it in our own factory. That is our double confirmation.

Johnson: What are the methodologies you use for testing?

Crystal Zhang: Our incoming inspection will check the parts’ solderability and electrical characteristics. With integrated circuits (ICs), they check more than solderability. They track the lot number and the manufacturer ID. Sometimes we find that someone has tried to copy the manufacturer logo, so we check the logo and markings on the components.

To read this entire conversation, which appeared in the September 2022 issue of SMT007 Magazine, click here.