Automotive: Reduce Annual Inventory Carrying Costs

Facing an ongoing chip shortage resulting from the COVID-19 pandemic, a well-known automotive manufacturer deemed it necessary to make a large bulk purchase of $2.5M worth of semiconductor chips necessary for the assembly of an integrated circuit that operates the vehicle’s fuel injection systems. However, this purchase would come with some challenges. These semiconductors were particularly sensitive to environmental factors such as humidity and would require a significant update to their current storage infrastructure. Another storage solution would be necessary if the transaction was completed, so the manufacturer turned first to a long-standing EMS provider, who offered to securely store the inventory with an annual carrying cost fee of 15%. Against the manufacturer’s tight budget, this was deemed too costly, and other solutions were sought out.

Partstat offered the manufacturer a personalized Inventory Ownership Solution where Partstat would purchase all the inventory on the manufacturer’s behalf, and then store the inventory in their industry-leading, ISO 9001-certified facilities in Orlando, Florida over a six-year period. Partnering with Partstat allowed the manufacturer to realize a savings of 47% in total inventory carrying costs. This savings was realized in addition to the preservation of working capital provided by the solution.

With the use of an Inventory Ownership Solution, the manufacturer was able to use both their carrying cost savings and freed-up working capital to help prepare their facilities for a transition to electric vehicle production, as well as expand their workforce which had seen layoffs at the height of the COVID-19 pandemic. With service and savings that went well beyond their expectations, the manufacturer selected Partstat to be their regular inventory purchasing and storage partner as their product designs continue to demand more sensitive electronic component acquisitions.