Proper purchasing procedures prevent post-assembly pitfalls.

Component procurement runs the gamut of potential issues and pitfalls, especially with procurement processes and policies mingled with rapidly emerging component technologies and end-of-component-life requirements. Several major areas must be carefully considered to maintain efficient purchasing. They include tracking date codes; evaluating inventory levels at in-house and reseller levels; maintaining checks and balances; watching for obsolete component lifecycles at PCB design; establishing sound lead times; maintaining good working relationships with semiconductor vendors; connecting with in-house and the EMS provider’s incoming inspection teams; extra care toward Pb-free versus eutectic components; and maintaining open lines of communication with customers.

Date codes are stamped on each active component and refer to the time of manufacture (Figure 1). Buyers often inadvertently place orders without specifically stating the date for a given component. In doing so, they feel the description suffices for popular or routinely ordered parts. However, for specific components known to fail ICT or flying probe test, for instance, and for which reliability is in question, it’s always a good idea to order components with specific date codes.


Buyers sometimes overlook date codes by focusing solely on the bill of materials (BoM) during ordering, yet still expect to receive quality components. To their dismay, a delivered part could be passed its lifecycle and potentially cause end-product failure. To ensure parts are current and reliable, buyers must declare date codes to avoid these and a host of other miscues.

Closely associated is the need to keep an eye on the correct inventory levels despite component supply conditions. Proper parts inventory is managed by bulk order placement together with scheduled future shipments and inventory bonding programs at warehouse levels.

Buyers also must be cautious about maintaining a limited inventory that doesn’t parallel a project’s total requirements. For example, for a number of economic reasons, a buyer may decide on a strategy of limited parts ordering over a given period. Such action is taken after close evaluation of a project’s component requirement schedule.

Several consequences could occur over time to severely jeopardize an end-product’s production schedule and the company’s time-to-revenue. These include: Demand spikes for a given component, stretching lead times; a component’s technology or specs change, thus affecting an original design; the vendor stops producing the part and second sources aren’t available. It’s best to guarantee parts availability by marrying project requirements with component purchasing.

Many OEM and EMS providers apply just-in-time (JIT) practices. Most trained JIT buyers are adept at purchasing components in time to meet production runs. However, other companies lack these JIT systems. In these cases, a buyer must monitor the component orders to ensure they are not placed too far in advance. The buyer doesn’t want components idling in EMS inventory. Just how long is too long is relative, of course, because in some cases, one extra month could tie up tens of thousands of dollars in cash flow. Buyers must be well versed in financial terms and have a keen financial acumen of when to buy and under what terms.

But caveat emptor. There is an art to knowing how far in advance component procurement should take place. That’s because purchasing has to take into consideration the production cycle involving test and debug cycles. For example, a buyer may need to buy the necessary components two months before the scheduled product ship date to accommodate those production cycles.

Going a step further, an ideal procurement practice is to arrange with suppliers longer payment terms, such as net 90 or net 120 days. Longer terms maintain a healthy balance sheet for the EMS provider because they permit a one- to two-month production cycle and one month post-shipping to receive payment from the customer. A positive cash flow is the result. Suppliers generally don’t agree to net 90 or 120 days, but a trained buyer with solid industry contacts will attempt to negotiate such an arrangement with competitive suppliers.

Locating hard-to-find, long-lead time or obsolete components needs its own strategy. When a component is not readily available, the burden falls on the buyer’s smarts and industry contacts to successfully cross-reference a part, locate the proper substitute, get customer approval (if necessary) to use it, all while maintaining production schedules.

As for purchasing quantity, it’s good practice to overbuy for attrition to prevent production shortages. This is particularly true for (inexpensive) passives, which can stall an SMT line if enough aren’t on hand. For example, if a job requires 300 capacitors, then the purchase order should call for perhaps 50 extra. Some will be lost in handling or the machines. Keep attrition in mind. The experienced buyer will know precisely the appropriate overage level to effectively cover for attrition.

Understanding component lifecycles and last-time buys is another important procurement aspect. Does the buyer have an adequate inventory of a particular last buy, short supply or almost-obsolete component? In this case, it is prudent to place separate POs for the required quantity of this component with scheduled shipments. This way, buyers know for certain they have at least a one-year supply intact until a replacement component can be found and designed in.

Checks and balances are also crucial in purchasing. There is a slight chance of receiving faulty, old or bad parts, no matter how seasoned the buyer is. Savvy purchasing managers rely on disciplined incoming component audit teams to verify and accept or reject incoming components. Table 1 shows examples of key items to verify, buyer options and examples.


Good Ties

It is wise to maintain good working relationships with semiconductor manufacturing sampling departments. For prototype EMS providers, being able to obtain a few samples of a new chip is especially helpful when the particular IC’s production cycle has long lead times.

Lead times for a given new product may stretch to eight weeks or more, yet an EMS firm’s customer may demand to evaluate a prototype within days of the order. Good ties with chipmakers can pay handsome dividends. Being able to expeditiously obtain samples, even just a handful, will help meet an OEM customer’s prototype requirements.

Staying in touch with chipmakers can help to alleviate problems. But one procurement area fraught with potential headaches is the actual source, i.e., from where components are purchased. Sources include direct from the chip manufacturer, value-added resellers (VARs), authorized distributors or brokers.

Again, caveat emptor, especially with brokers. There are good brokers and disreputable ones. In no way are these statements made to disparage good, reputable brokers. Unfortunately, brokers, knowingly or not, often deal with gray market components, which are sometimes not up to quality standards and may contain used or bad parts.

Here, the disciplined buyer needs to ask a broker a list of pointed questions relating to the components under negotiation. The broker’s reputation should be examined. Has he left a path of destruction with other EMS providers? Some personable brokers are excellent salespersons but lack after-sales support or RMAs. The buyer must also carefully evaluate the components through stringent incoming component audit procedures.

Sometimes, unscrupulous brokers sell so-called “pulled parts,” which are extracted from older or discarded electronics systems. These parts may operate satisfactorily; however, most often they don’t because they’ve already undergone multiple reflow cycles. Further, it’s questionable as to how many different applications they’ve been subjected to. Pulled parts can easily sabotage high-reliability electronics applications. A disciplined incoming inspection is especially valuable in these instances to ensure faulty or questionable components are discarded early in the process, before entering assembly (Figure 2).


Stay in the Loop

Lines of communication must be kept open with OEM customers for several reasons. One is to avoid getting stuck with No Cancellation No Return (NCNR) parts. Buyers must ensure that NCNR components will definitely be used in a customer’s PCB project. Otherwise, a profitable program can sink quickly into a money-losing proposition.

Another reason is to prevent delivery misunderstandings. Case in point: a component manufacturer’s inability to supply product on a timely basis, for whatever reason. As a result, the production schedule is hampered or, worse, pushed back. The buyer must stay ahead of the game to make the customer aware of supply-chain conditions resulting in delivery rescheduling. Doing so, the buyer and procurement team maintain the customer’s trust and confidence.

Third, OEM customers frequently issue engineering change orders (ECOs). ECOs are not part of the original BoM and assembly drawings. OEMs add these instructions during latter stages, commonly during prototyping. Component issues arise when the revised documentation enters the process flow. It is crucial for buyers to stay in the loop with customers, especially regarding ECOs, to prevent costly confusion, lost production time, ill feelings and shipment push-backs.

Last, differentiating Pb-free and eutectic components is as important as any other procurement responsibilities. Make sure component supplier shipments clearly distinguish between eutectic and Pb-free components on outside packaging and internal markings. Also, BoMs and customer communications must define which type is to be used on a PCB to avoid costly mistakes.

Zulki Khan is president and founder of NexLogic Technologies Inc. (nexlogic.com); zulki@nexlogic.com.

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