All OEMs and CEMs are dependent on a reliable source of components to be able to run their operations effectively. This is why it can be so disruptive when, for whatever reason, components become hard to source.
Why are some components so difficult to source?
The demand for electronic devices is at an all-time high and, even before the onset of COVID-19, the electronics industry was suffering from component shortages and lengthy lead times.
The investment in the smartphone, automotive and IoT markets means that demand for many common components is too high for suppliers to meet, and the demand for other components not used in these markets is being reduced, limiting their production, and sometimes resulting in obsolescence.
Now, with an increased demand for medical equipment to help combat the pandemic, these same challenges have been further exacerbated, so how can they be addressed?
Be flexible
Flexibility has long been a useful trait for supply chains but is now more important than ever. Sticking rigidly by a particular way of working or partnering exclusively with suppliers because of individual product costs can be detrimental when it comes to finding hard-to-source components. Finding trusted backup suppliers for all your products is essential in these unpredictable times.
Diversify
One way to source hard to find components is to start looking beyond local supply lines. Diversifying your supply chain globally means you may find certain components easier to come by, and possibly at a reduced price. This strategy is particularly effective when certain government trade policies or travel restrictions are hindering the countries from which your usual suppliers operate.
Employ strategic sourcing
Strategic sourcing is a long-term, ongoing strategy that aligns all your procurement activities with the current state of the market while minimising the risk to the supply chain and securing the best possible total cost. Employing this strategy means your sourcing methods are always suitable to the current marketplace and it is a process of continual adjustment, rather than a complete overhaul when there is a sudden change.
Work with suppliers on sales forecasts
Knowing ahead of time when you will need certain components is an effective strategy to combat lengthy lead times and sales forecasts are the best way to get this information. By using past sales data to inform your sales forecasts, you can work with your supplier to have your components prepared well in advance and in the required volume.
Look for alternatives
As a more direct response to difficulty sourcing components, you could look for alternatives that you can use instead. Because the shortage of components such as MLCCs is industry-wide, finding alternative suppliers may not yield much better results. However, different capacitors such as polymer or tantalum capacitors may be a suitable substitute in some applications and may be more readily available from suppliers.
Trade with others in the industry
Whilst it is unlikely that OEMs or CEMs have excess stock of components during a global shortage that they don’t need, some other components that may be hard to source, such as in the case of obsolescence, may be found. Trading for these components may be an option, especially if you have excess stock of another component to offer. Holding excess stock is detrimental to cash flow, so offloading it is beneficial to all parties.
Sourcing hard to find components is a headache for any OEM or CEM, but there are workarounds, even in challenging times such as those we find ourselves in currently. The most important trait to have is flexibility; be prepared to go outside your normal processes and you may find hard to source components easier to come by.
Jeff Brind is the Chief Information Officer at Rebound Electronics, a privately-owned independent electronic components distributor experienced in supply chain management.