Automotive electronics · Automotive and auto components
Match your semiconductor commitments to what vehicle makers have firmly ordered
An automotive electronics maker commits to components months before an OEM commits to vehicles. We measure that gap: non-cancellable orders, last-time buys and consigned stock against firm customer schedules. Supply security then does not quietly become an inventory write-off.
In one paragraph
Electronics suppliers to the vehicle industry buy semiconductors on long lead times and non-cancellable terms, while their customers can cut schedules at a few weeks' notice. They make electronic control units, sensors, instrument clusters, lighting electronics, telematics and infotainment for vehicle makers and tier-1s. Most turn over ₹50–1,000 crore. The chief financial officer or founder usually leads the work, often with the head of supply chain.
Chief financial officer, often with the head of supply chain
The economics
How the money moves in this trade
Electronic assemblies depend on microcontrollers, power devices, sensors and passives sourced globally. Lead times often run to months, on non-cancellable, non-returnable terms. Components reaching end of life trigger last-time buys sized to years of expected demand. Imported content is priced in foreign currency. Assembly may be done in-house or by an electronics manufacturing services partner holding your consigned components.
Vehicle makers fix piece prices for the programme, expect annual reductions and change schedules frequently. Development effort for software, calibration and validation is substantial. It is sometimes paid separately as non-recurring engineering and sometimes buried in the piece price. The business can be short of one component and overstocked in many others at the same time.
The problem
Where the numbers usually break down
Non-cancellable commitments are not reported
Open purchase orders that cannot be cancelled are not compared with firm customer demand, so exposure from schedule cuts is unknown.
Last-time buys are not provided for
Large end-of-life purchases sit at full value with no review against the demand they were bought to cover.
Development cost is not recovered
Software, calibration and validation effort is expensed with no record of whether it was billed or recovered in the piece price.
Consigned stock at partners is unreconciled
Components held by manufacturing partners are not reconciled to their consumption and yield, and losses are absorbed.
Spot purchases during shortages distort cost
Components bought from brokers at premium prices are absorbed into average cost rather than raised with customers or traced to programmes.
What we do
The work, and the result each part produces
Commitment against demand report
Inventory, non-cancellable orders and last-time buys compared with firm and forecast customer schedules, by component and programme.
Exposure to schedule cuts is visible before it becomes stock.
Excess and obsolescence review
Component and finished-goods stock reviewed against demand on a fixed cycle, with provisions on a documented basis.
Inventory is stated at what it is worth.
NRE tracking and recovery
Development effort recorded by programme and compared with what the customer paid or the piece price recovers.
Engineering investment is recovered or knowingly accepted.
EMS consignment reconciliation
Components consigned to manufacturing partners reconciled to boards produced, agreed yield and stock returned.
Partner losses are identified and claimed.
Shortage premium attribution
Broker and expedite costs recorded against the programme and customer that required them.
Shortage costs can be raised with the customer that caused them.
Programme profitability
Contribution by programme after price-downs, exchange, development cost and obsolescence.
New programmes are quoted from evidence.
Where we start
The first steps of an engagement
Open orders and customer schedules
We ask for open purchase orders with their cancellation terms, last-time buy records, stock at your plant and at EMS partners, and firm and forecast schedules from each customer.
Commitment set against firm demand
Inventory, non-cancellable orders and last-time buys are compared with firm and forecast demand by component and programme.
A documented provisioning cycle
Excess and obsolete stock starts being reviewed on a fixed cycle with a documented basis, and broker purchases are tagged to the programme that needed them.
A commitment against demand report
The first report shows the commitment not covered by firm demand, by component and programme, alongside excess stock and shortage premiums paid.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Non-cancellable commitment against firm demand
- Excess and obsolete inventory, by programme
- NRE recovered against spent
- Consigned stock reconciled, by partner
- Shortage premiums paid and recovered
- Contribution by programme
Who it suits
Written for, and not the right fit for
- You assemble boards for others as a contract manufacturer without your own products — the consignment and yield work applies, but much of this page does not.
- You need functional-safety, cybersecurity or homologation approval — that sits with accredited bodies and the approving authority.
- Makers of ECUs, sensors, clusters, lighting electronics, telematics and infotainment.
- Electronics suppliers using contract manufacturers alongside in-house lines.
- Companies moving from conventional to EV and connected-vehicle programmes.
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Finance technology and automation
Systems configured around your process, not the other way round.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
How should last-time buy stock be provided for?
By comparing it with the demand it was bought to cover and reviewing that each quarter. If the programme volume falls, the excess is provided for on a documented basis, agreed with your statutory auditor.
Can we charge OEMs for semiconductor shortage premiums?
Some agreements allow it and some customers accept it case by case. Recording the premium against the programme that caused it is what makes the request possible.
Does commitment reporting work if our ERP only shows inventory?
Yes. Open purchase orders and their cancellation terms usually exist in the system or in the buyers' files. Bringing them alongside demand is the work, and it doesn't need a new system.
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