The electronics industry has been enduring a component shortage for some time now, caused by problems that have only been exacerbated by the Covid-19 pandemic. As supply chains begin their recovery from the pandemic, it is essential that they address the difficulty to source certain components and develop strategies to work around it.
What has caused the shortage?
There is more demand than ever for electronic devices due to significant investment in the smartphone, automotive and IoT industries. The demand for these devices is currently far greater than the rate at which they can be produced, resulting in long lead times for the required components.
Since the pandemic, the need for medical equipment that also uses many of these components has increased, further compounding the effects. At the same time, the demand for components not used in these developing markets is dropping, meaning manufacturers are limiting the production of them.
How to manage the electronic component shortage
Adopt a flexible approach
Flexibility is incredibly beneficial when it comes to sourcing hard-to-find components. If you stick rigidly to the same suppliers and channels that you always have, then you are powerless when the market is disrupted. As well as your primary suppliers, you should have trusted backup suppliers for all of your products.
Diversify
To give yourself the best chance at sourcing hard-to-find components, you need to diversify your supply chain globally. Restrictions and hold-ups that are affecting one of your suppliers are likely to also affect the other suppliers in that country. By having partners overseas, you may be able to source components from a different country, when trade or travel restrictions are inhibiting your suppliers in another.
Use sales forecasting
Sales or demand forecasting is a proactive strategy that anticipates what components you are going to need and when. By using past sales data, you can work with your suppliers to pre-empt your orders for the coming year. If you know you are likely to sell most of a product that uses a hard-to-find component in the winter, then you can arrange with your suppliers to have that component manufactured and set aside for you in plenty of time.
Switch to strategic sourcing
Strategic sourcing is a strategy that requires constant evaluation of the market and aligns your procurement activities with it and minimises risks to your supply chain. This means that the components you source and which suppliers you use are not solely determined by the lowest individual cost. Instead, these designs are made in reaction to the market and therefore prioritise availability, among other criteria.
Find alternative components
If a component you need is in short supply, then is there any other component that could take its place? For example, there is an industry-wide shortage of MLCCs, a vital component in many designs, but different capacitors such as polymer or tantalum may be a viable alternative, and easier to come by, maybe even from your usual suppliers.
Redesign products
If you cannot find an alternative for a component in your current design, can the product be redesigned to not use that component at all? If you can go back to the drawing board with your product, and design it using components that are all readily available, then you won’t have to worry about shortages, and you may even be able to pull ahead of your competitors.
The electronic component shortage has been a long and trying challenge for supply chains throughout the industry. While we may have to continue waiting for supply to catch up with demand when it comes to many components, these strategies may help supply chains not only to work around current market difficulties but also develop practices that help them in the future too.
Author Bio: Jeff Brind is the Chief Information Officer at Easby Electronics, a privately-owned supplier of electronic components with global market pricing, sourcing and supply.