Paragon's Vendor Managed Inventory (VMI)

Paragon's Vendor Managed Inventory (VMI) service is a line-side, BOM-based solution that forms another part of our Total Component Management™ services portfolio.

Paragon VMI means that material resources are located line-side, at our customers premises, in an 'assembly-ready' or 'machine ready' format, delivering instant access to electronic components when they are needed.

Paragon VMI removes hidden component procurement, inspection and administration costs to further reduce the real cost of acquisition.

Providing on-site access to the electronic components you need.

Through our line-side feed and remote warehousing set-up, we deliver production-ready electronic components straight to your facility. Operating on the basis that all stock belongs to us, our VMI capabilities mean that you only ever pay for stock as it is used - enhancing cash flow and reducing overall inventory holding.

With the Paragon VMI system, you don't have to report material usage on an individual component basis. Instead, you can report material usage in terms of product built or BOM, reducing your administrative burden and simplifying invoice processing.

We control our VMI line-side stores by establishing maximum or minimum levels for specific factory locations on our ERP system. These levels are dictated by future requirement forecasts. We identify when stock is likely to fall below the minimum threshold or where an unusual increase in build forecast requires extra stock; and we support the entire system with buffer stocks and protected inventory.

Case Study – Global supplier of industrial communication systems.

In order to outline how the system operates, the following is an application overview of a Paragon VMI solution that has been in operation now for over 13 years.

Paragon customer service

Our customer manufactures communications systems for use in a range of high integrity applications. They have an extensive product portfolio, with over 100 different product types. Batch volumes are small, typically 25 to 100 off, and there is a high level of component commonality.

The customer works to extremely short lead-times and requires a high degree of flexibility. Accordingly, quick manufacturing turnarounds are required when loading different products onto the SMT assembly lines.

In order to operate under these time pressures, maintain quality and achieve lower attrition levels, all IC's, where appropriate, are required in a reel format.

The Paragon line-side store service enables this customer to have over 1500 parts available, on-site, as 'consigned stock' but to only be invoiced for these parts when they use them. 

The line side store is controlled by setting min/max levels for the specific factory location on the Paragon ERP system. In addition, a forecast build plan is agreed with the customer.

Paragon's replenishment program runs daily, and identifies when stock is likely to fall below the minimum threshold, or where an unusual increase in build forecast necessitates extra stock. 

Each week, a consignment of stock is delivered to the customer's assembly line. The stock is labelled with the customer's part number, quantity, and the stores and/or machine location at the customer's site. 

supplier of industrial communication systems

Where the demand is relatively low, Paragon prepares custom reels of as little as 100 devices, to save the additional cost and liability of buying in full reels. In addition, reels are sometimes split, for example a 5,000 device reel is split such that 2,500 devices are held on a reel at the customers site whilst 2,500 are held at Paragon. This provides a safety stock in case a reel is lost or damaged, without over committing on low run-rate parts. 

Buffer stocks are held in the Paragon warehouse plus protected inventory with our suppliers. The customer is advised of the levels of stocks committed on their behalf, the run-rate expectations and consequences should a part no longer be required. 

Every week the customer advises us which pcb assemblies have been manufactured. The VMI system, which contains full details of all the customer’s BOMs, calculates the components used, amends the stock accordingly, includes an agreed allowance for wastage, and invoices the customer appropriately. 

This saves the complication of invoicing several thousand line items each month.A periodic stock check is performed to ensure all stock levels are accurate such that invoice adjustments can be made as appropriate. 

Benefits of the Vendor Managed Inventory system

  • Stock reduction - all stock belongs to Paragon
  • Stock availability - 'instant' access to required components
  • BOM based - significantly reducing complexity and cost of operating
  • Improved cash flow - only paying for stock as it is used
  • One principal supplier for all electronic components
  • Reduced number of purchase transactions
  • Purchase ledger transactions reduced (single invoice per board)
  • Invoice queries eliminated
  • Production system unaffected, still have the same line-side stock
  • Reduced handling - one consolidated incoming shipment per week

Why Vendor Managed Inventory?

Paragon VMI will:
  • Enhance your stock availability
  • Improve your cash flow
  • Minimise the number of purchase transactions
  • Reduce admin such as invoice processing
  • Result in less material handling with consolidated shipments

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