December 12, 2013
Editor's Note 
 What type of environment will buyers be facing in 2014? By all indications, it will be more of the same. Barring an economic upheaval, component supplies will be adequate; prices should be stable; and demand will slowly increase.

According to the Institute of Supply Management -- which surveys U.S. manufacturing and purchasing executives on a monthly and semi-annual basis -- the business outlook is positive for 2014. Overall manufacturing revenue is expected to grow by 4.4 percent in 2014, according to Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee. Better yet, CFOs will be loosening up their purse strings and increasing capital expenditures by 8 percent in the manufacturing sector. Depending on where you stand in the supply chain, that could mean a long-awaited equipment upgrade or increased activity in procurement.


Buyers might also be getting help next year. The ISM expects hiring will pick up in 2014, and even though purchasing isn't specifically cited, new jobs will created be in manufacturing. The actual numbers: employment in the manufacturing sector will increase by 2.4 percent next year. 


A lot of what buyers will be doing next year will still be the basics: assessing suppliers. One thing to keep an eye on, recommends EPS Contributing Editor Douglas Alexander, is date codes. "Whenever there are recurring failures of identical part number components, the supplier correction action report should include not just the part number and quantity, but be sure to record the date codes on the products being returned for the corrective action analysis. Here is why: I have noted component failures where only certain date codes of a product line failed in the field." 


Another basic Douglas pays attention to: book to bill ratios. When you look at the same ratio on a quarterly or yearly basis, you can spot trends. For instance, says Douglas, "If I have a yearly book-to-bill of 1.2:1, I am in good shape and maintaining a strong backlog which may eventuate in an extended product lead time until I can manage the necessary infrastructure growth. If my book-to-bill is 0.8:1, then I have to tighten my spending belt. Eventually, my billing will drop to my lower booking numbers; I am not growing. I am in fact shrinking." So how does this impact purchasing?


If sales are down and the book to bill is <1:1, you may want to adjust the terms on your supplier contracts, Douglas recommends. "I may have to decide with Accounts Payables who is going to get paid on time and which vendors I may have to leave twisting in the wind. I may decide to build less for safety inventory or adjust my build-to-stock quantity and only build to order. When the book-to-bill ratio changes, the materials strategy needs to be looked at for a possible change. This implies that the book-to-bill numbers are made known to purchasing management and that the company has a way of adjusting procedures to guarantee that the economics track to ensure the short and long term health of the company."


Here's hoping for a healthy -- and happy -- 2014.



Barbara Jorgensen

EPS Managing Editor    
Featured Articles 
Don't hold your breath if you believe Molex Inc. will not change at all or only superficially following its acquisition by Koch Industries Inc. The new master is in the house and more than the furniture will be shifted around. Link
Ametherm, a U.S. manufacturer of thermistors and other electronic components for circuit protection, has doubled the size of its manufacturing plant with the purchase of a 36,000-square-foot facility in Carson City to meet increased demand.  Link


Nokia Corp. charting a new future. Only those who haven't researched its history will look at the recent challenges and write off the Finnish company. Nokia is not new to change; it's first logo spotted a fish.  Link

The electronics industry's expansion into China is far from complete. Companies that did not join the mass migration to the low -cost region in its initial phases have kept a close eye on the market. Link

After more than a decade of savage pricing pressures that devastated margins and profitability at suppliers combined with wild demand-supply swings, the semiconductor DRAM market appears to be finally settling into a more "normal" trading pattern, according to an executive at Micron Technology Inc. Link

Gerry Fay takes on the role of global president at Avnet Inc.'s Electronics Marketing (EM) group at an interesting time in distribution's history. The rampant consolidation of the 1990s has tapered off; offshoring has been around for a few years; and electronics continue to proliferate in new applications. Link

Name a product today and somewhere someone is trying to figure out how to infuse it with semiconductors, overlay it with software applications or connect it with other segments of the economy. Link  
Manufacturers Expect to Add Jobs in 2014
Based on unemployment data from the U.S. government and a forecast from the Institute for Supply Management (ISM), the employment outlook for 2014 appears positive. But where are those jobs coming from?Link

UL Environment, a business unit of UL (Underwriters Laboratories), announced that it has released new sets of sustainability requirements for tablets and wireless hot spots Link 

Market conditions have changed in the power semiconductor market in 2013, and this is good news for suppliersLink  

It's Never Too Late For China

One of the things we at EPS are trying to do is shine a spotlight on companies that may not get a lot of press. I've spoken to a number of such companies recently and an interesting trend is emerging: these companies are only now seriously evaluating China.  Link 

PC Shipments to Fall by Double Digits

Worldwide PC shipments is forecast to fall by -10.1% in 2013, slightly below the previous projection of -9.7%, according to the International Data Corporation (IDC) Worldwide Quarterly PC Tracker. Link  

News Wire


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