Centex Inc. - a Case Study of Anliv Electronics Manufacturing Service Provider

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Table I shows an overview of Centex Boston’s Supply Chain metrics, benchmarked against a reference set of companies in the industry. The reference group was mainly comprised of “box” manufacturers or OEMs. They represented Centex potential client base. Centex Boston had poor on-time delivery performance, high order fulfillment lead times and high levels of inventory.

Manufacturing Bottleneck

The Centex Boston facility was acquired from HP. Its current customers included HP (82%), Dell (10%) and others such as Cisco and IBM (8%). Due to several problems related to a facility relocation effort, manufacturing bottlenecks accounted for a substantial part of the order fulfillment lead times,

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Supplier Performance

Contract manufacturers are required by the OEMs to choose from their list of approved vendors. Centex has little leverage over its suppliers. Poor on-time delivery from its suppliers affected Centex performance.[pic 2]

Demand Planning

The demand data for HP products is provided by HP every 2 weeks. There is a high level of variability in the MRP runs for HP products. This causes severe problems for manufacturing capacity planning. Further, since the manufacturing lines are shared for multiple products, it has ripple effects on other products as well.

Raw material purchases are based on the MRP runs, since HP requires that Centex buy raw materials based on its projections. Commit dates for the orders are based on raw material availability. However, since manufacturing lines are shared, there is often an over-commitment of the manufacturing capacity, as planners currently have no visibility into the manufacturing schedule of other products. Planning is also done based on rated (not effective) throughput of the manufacturing lines. This results in significantly high levels of inventory. Although HP buys the surplus inventory when products are discontinued, Centex has to pay the inventory carrying costs.[pic 3]

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HP Account Management

HP accounts for 82% of Centex Boston revenues. Due to poor on-time performance, HP is threatening to look for other contractors.

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Compared to Dell products, Centex has much higher inventory levels and much lower on-time delivery performance for HP products. Dell has dedicated manufacturing lines. Centex maintains an outbound hub for Dell.

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Receiving Process

Lack of integrated systems causes multiple data entry and 3-7 days in receiving. Material expedited by the planners/ puchasers often sit in receiving for many days. The receiving area has expanded and occupies part of the shop floor. BPCS is their ERP system and Viaware is the warehouse management system.

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Work In Process Inventory

There is a lack of material discipline on the shop floor, resulting in high WIP inventory and high material wastage. Inability of the ERP system to track inventory on the shop floor results in a loss of inventory data integrity for planning purposes. Partly used reels of electronic parts are not returned to the warehouse and remain in WIP. Thus, planners often have to order parts that are already there, because they are not sure if the part is still available. Inventory back-flushing occurs at the end of the process, when material inventory is adjusted based on the number of boards manufactured and assuming a standard wastage rate. However, frequent physical counting of the inventory takes place to accurately update the records for WIP and warehouse inventory. Materials are often misplaced in the warehouse.

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