CSI Industrial Blog Post #3 Graphic V2

How Global Contract Manufacturers Create Working Capital for Customers

August 5, 2019

Cash is king!  Now more than ever sourcing leaders are being tasked with doing everything possible to increase their company's working capital.  One way to ensure this happens is through the use of a global sourcing integrators.  Below are four ways that the right integrator can ensure an increase in working capital to its customers.


1. Landed Cost Pricing

As a buyer of globally sourced products, you understand all of the costs that go into logistics, transportation and customs clearance, which are on top of the gross cost of the product you’re purchasing. Most global sourcing integrators take these ancillary costs and roll them into their price to you.  This frees up your working capital, as you don’t have to come out of pocket for these added costs at the time of receipt or before receipt of the components.


2. Float all Up-Front Development Costs Until Samples are Approved

Tooling, setup and engineering charges are a normal part of getting a new manufacturer approved and qualified.  Depending on the complexity of the project, these costs can be extremely expensive.  The right sourcing integrator normally defers these costs until after the samples are completely approved for production or only charges a certain percentage of the total cost.  Regardless, you win as you don’t have to come out of pocket for the entire cost until the projects are formally approved for production.


3. Finance & Hold Inventory Locally & Release to schedule (JIT)

Being able to finance and hold inventory is what sets apart a great global sourcing integrator from an average one.  Shifting inventory over to an integrator's warehouse ultimately reduces your holding costs, as you now only have to carry a fraction of the inventory that you once had to hold.  In addition, with blanket purchase orders, most great integrators will hold that inventory up to a year and release to you as you need inventory (Kanban release, batch release, weekly release, etc.).  Offering this type of JIT service continues to be crucial in ensuring that you get the parts you need, when you need them.


4. Finance Receivables with Credit Terms

A qualified global sourcing integrator should offer inventory financing solutions.  These solutions enable you to increase your working capital by:

  • Offer savings on LOC/bank interest
  • Allowing optimization of your warehouse space/assembly cell space
  • Offering early pay discounts
  • Decrease of operational expenses
  • Rationalization of the number of suppliers you have to manage
  • Reduction of freight/logistics costs


Component Sourcing International provides supply chain solutions for unique manufacturing challenges by lowering your costs and improving your productivity.  We give you both the peace of mind and confidence to know that your finished products will be of the utmost quality and at the best pricing the world has to offer.  To learn more about how CSI can act as your Global Sourcing Integrator, contact us today.

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