Shortages continue to be one of the foremost concerns for most organizations in both the electronics and electronic component manufacturing sectors. These periodic disruptions in the supply chain create significant challenges for OEMs and EMSs, which translates to hurdles as it pertains to keeping the production lines running. Many teams have found that trying to use their previous sourcing & procurement methods isn’t working as well in a marketplace riddled with shortages. Knowing how best to handle and effectively mitigate component shortages is not only a crucial element of supply management, but it can make or break an entire organization.
Overall, relief from electronic component shortages seems to be inching further towards resolution. This is a huge relief. Still, there are ways you can and should prepare for the next shortage since component shortages aren’t going anywhere. Strategies you could consider include:
Closely Monitoring Technology Trends and Market Updates
A shrewd supply management professional needs to stay up-to-date with new technology trends. In doing so, it becomes possible to foreshadow any potential future shortages. When armed with this information, it is possible to be more strategic when sourcing components. Invest in publications where market watchers predict trends in availability. By being aware of these sentiments on discrepancies in the supply and demand of electronic components, you should be able to avoid massively debilitating scarcity. Industry experts point out the need to include supply chain experts’ recommendations when designing new products. These experts are instrumental in that they can successfully help with avoiding potential supply chain nightmares.
Create a More Aggressive Vendor Managed Inventory Plan for Critical Components & Shortages
OEMs already deploy VMI (Vendor Managed Inventory) and buffer stock (20-30%) to address demand fluctuations. But the problem is that’s not enough in a situation like the one we’re facing today. Though OEMs could store more buffer stock, the constraint there is the cost of holding onto that inventory. Typically, this goes against the LEAN/just-in-time inventory principles that most OEMs traditionally prefer to use in supply management. Many organizations and finance teams are re-evaluating these traditional approaches to consider the ramifications of just-in-time/low inventory. They’re now forced/open to holding more inventory just to be able to ship products out and meet their obligations to customers.
We’re also starting to see organizations using modern and new technology solutions to monitor/predict potential lead time changes and have an agile/resilient supply management team that can react quickly to these shocks.
Diversifying Your Component Sources & Suppliers
Suppose the part you require goes obsolete or your supply simply drops the ball during delivery. In that case, you end up having your entire supply chain go into chaos. Relying on just a single source for all of your electronic components supply is a perilous position to be in. To prevent complete halting of production in the event of shortages, it would be prudent for the OEM or EMS provider to have a second source on your Approved Vendor List (AVL). This comes in particularly handy if the component is highly-specialized or even customized. Overall, you want to avoid last-minute rushes, as doing so could lead to improperly vetting suppliers. The consequence is the possible introduction of inferior electronic components or hardware into your supply chain, effectively tainting your reputation.
Source the Open Market for Alternate/Cross-Part Options
Granted, sourcing the open market for options can be a cause of concern to manufacturers, especially if your approach to date has typically been “just get more people calling around.” You end up with entire teams deployed to find a single part. The execution of these searches has a
significant revenue impact that necessitates a reexamination of the entire system.
Thankfully, there are more modern solutions on the market (including Part Analytics) that offer the ability to identify alternate parts that are not just acceptable, but available and make recommendations to the product engineer/designer. We’re starting to see teams making the shift to design-for-supply by granting the product team access to these tech tools. Ultimately, the cost of the product pales in comparison to the ability to get products built and shipped to customers faster than your competitors.
Written by Jack Zhang from AIChipLink.
AIChipLink, one of the fastest-growing global authorized electronic component distributors in the world, offers millions of products from thousands of manufacturers. Whether you need assistance finding the right part or electronic components manufacturers for your design, you can contact us via phone, chat or e-mail. Our support team will answer your inquiries within 24 hours.
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