Supply Chain & PCB Manufacturing
By Jared Poulsen (July 2025)
PCB Manufacturing is complicated. Parts go end of life, regulations and compliances are never ending, and components keep getting smaller, with tighter tolerances. On top of that, you need to manage supply chain lead times and recently, ever-changing tariffs. In a perfect world, we could afford to stockpile a year's supply of inventory. But we know that inventory is best sold, and the cash is used to invest back in the company.
What is the appropriate amount of inventory we should stock?
In "The Supply Chain Revolution" by Suman Sarkar, he mentions how Tim Cook was tasked with turning Apple's operations completely around in 1997 by shrinking inventory supplies from months to days with a streamlined supply chain. Looking now at their latest 10-K filings in 2024, they report an inventory of $7,286M and Net Product Sales (NPS) of $294,866M. If we use this ratio of (Inventory/NPS), we see Apple carries an estimated 2.5% of its yearly inventory at any given time, about a 9-day supply. At Signetik, we prefer to have a little more insurance with less risk to our supply chain, as our business isn't D2C, but rather, B2B. Therefore, we aim for 4% (Inventory/NPS) in PCB assembly (PCBA) manufacturing. Here are some of the first steps you can take to streamline your PCBA manufacturing so you can cut inventory, free up cash flow, and invest in your next product!
How to start
Suppose you're ordering 100,000 PCBAs a year for your product, and your lead time is 12 weeks. With this kind of lead time, the most you can realistically space out your shipments with 1 CM is every 3 months. Your preference for having the lowest inventory is the most frequent deliveries possible, but this may also depend on how your product moves. If your product ships out at 100,000 units at a time, then getting them at the rate you can process them is best. For the sake of this article, let's suppose you're either stocking a distributor or sales are consistent throughout the year. If you are receiving shipments of 25,000 quarterly, then to guarantee you never miss a deliverable, you'd have to inventory 25,000 of the PCBAs. That's a 25% (Inventory/NPS).
The reason you need to stock these 25,000 units is in the case of receiving a bad batch of units. It's unlikely, but when it happens, it can happen to the whole lot. There are plenty of things that can go wrong, such as:
- faulty/misplaced/end-of-life components
- late deliveries due to CM build issues
- component shortages
- black pad (corroding in the gold to nickel plating in ENIG)
If you're not checking the supply chain constantly, eventually you'll find something that disrupts your build schedule. Your CM will help you through the issues, but without that inventory, you have no insurance on meeting immediate deadlines. And there's no sense in losing a good CM because of bad supply chain management. However, 25% (Inventory/NPS) is just too high, let's see how we can cut it down.
You may struggle to find a CM who will ship every single month; it generally doesn't work well for their production. What does work well for CMs is to build, ship in batches, and not return to that build for several months. A CM may also be able to build a larger batch and ship in smaller batches, within reason. With this latter option, you can work to set up two or more CMs, alternating their shipments. It takes a bit more planning, but it gives you more options to adapt during production. These changes may be decreasing production from one manufacturer, as you see sales declining, or increasing production as sales increase.
An example schedule is shown as follows. With 100,000 to produce in the year, boards typically take 12 weeks to produce in smaller batches.
NOTE: Extra units are built with the anticipation of fallout. This would produce extra stock, but builds can later be adjusted to keep the stock from growing.
Doing a production run like this takes more management than sending one yearly PO, but you get a consistent pulse on your supply chain. You will likely be able to send the CMs a yearly PO with quarterly deliverables. This may increase the cost slightly, but allows the CM to plan and get a better price than smaller POs. The yearly schedule could be adjusted dynamically, with enough notice to the CMs. You would then be able to see quarter-to-quarter changes in pricing, warnings for low stock, and scale production up and down as your sales shift.
Best of all, your inventory can remain at 4,200, just 4% (Inventory/NPS) while still guaranteeing product availability. At Signetik, we've found this style of manufacturing improves our relationship with our CMs and reduces stress free as the work is front-loaded instead of being reactive. Sell off some inventory by optimizing your supply chain, without adding risk. You might be able to free up a year's worth of cash and be able to create your next big product!
