The Secrets to Building Resilient Supply Chains for Electronic Components

 

A unique combination of global economic factors is continuing to impact supply chains across varying sectors. The COVID-19 pandemic has changed how businesses operate for good, and the UK’s exit from the EU has made the sourcing and supply of components much more challenging, with many imports now subject to additional cost and administration requirements.

Supply chain challenges have also been exacerbated by the Russian invasion of Ukraine, while the global rise in energy costs has created greater financial burdens which companies are having to pass on, at least in part, to their customers.

The impact of these factors has been felt acutely, not least in electronic component manufacturing and distribution.

 

The Resilience Challenge

Availability in some areas has been severely impacted, with costs increasing across the board. According to research from Gartner published on The Business Desk, passive components cost at least 20% more than the previous year, while some active components have doubled in price, with further rises anticipated throughout 2023. The same article reported that lead times reached record levels in the first half of last year, surpassing 12 months, with no decrease to be expected until the end of this year. These challenges have tested the resilience of supply chains in every company operating in the sector.

The possibility of a complete loss of supply without warning has been a very real one. That in turn engenders a requirement to secure alternative sources of supply at very short notice, in all likelihood at greater cost and with the teething challenges that so often come with bedding in a new supplier.

 

 

Navigating the Supply Chain Maze

This is exacerbated by the decisions made by some manufacturers to move production away from China to diversify their supply chain, which will not be a rapid process and will again impact on availability in the short term.

Companies have taken various measures to tackle the shortage of semiconductors. According to McKinsey, the automotive sector has even established dedicated ‘war rooms’, pooling supplies and collecting more sophisticated data on the semiconductor value chain and chip-manufacturing locations to help inform decision-making.

Where availability challenges cannot be overcome, there is inevitably an impact on production schedules, with potential delays to delivery - and their associated costs emanating from penalty clauses in contracts – as well as the impact on cashflow and customer satisfaction. Perhaps even more importantly, a company’s overall reputation, hard won over many years, can be ruined at a stroke if it repeatedly fails to deliver on time.

An additional challenge occurs when a preferred part is unavailable and there are no exact like-for-like alternatives on offer. The ramifications of this can be even greater, entailing partial or complete redesign of the end product.

 

 

Proactive Solutions

Many of these challenges can be addressed proactively by customers through the judicious use of resources such as price comparison websites specific to the sector.

Among these is oemsecrets.com, whose founder and managing director, Sam Cowley, explains: “For many years, supply chains were relatively steady and reliable and it was not an issue for buyers to simply source all of their requirements from a few suppliers, or even just one. Prices were similar and the value extracted from ‘shopping around’ was scant, given the amount of time involved.

“However, in the current, more volatile climate, there are far greater risks associated with using a single source of supply – and in any case buyers need to weigh up a number of factors such as price, availability, suitability and lead times.

Freely available resources such as oemsecrets.com allow buyers to see all products and sources of supply - and make an informed decision on the right one for that specific requirement at that time.

They can also more readily explore alternative suppliers and products and put strategies in place to secure supply should one supplier be unable to deliver. Meanwhile, using oemsecrets.com regularly also helps buyers to remain aware of new product introductions across the market – a particular benefit if these solutions feature more competitive pricing, better availability or higher suitability than their current products.

Overall, this approach will enable buyers and their companies to forge resilient partnerships with a range of suppliers, ensuring an overall robust supply chain which can withstand any challenge – economic, technical or logistical.”