Since the onset of the coronavirus pandemic, existing problems with long lead times and component shortages have only been exacerbated. OEMs and CEMs are dependent on a reliable source of components to be able to manufacture their products and run their businesses effectively but factors outside of their control can make this impossible. In these situations, businesses must develop methods that allow them to still source these hard-to-find components.
Why are there component shortages?
There are a number of components, such as MLCCs (Multilayer Ceramic Chip Capacitors) and semiconductors, that are used in a wide range of everyday applications. However, demand for these items is currently far outstripping supply capabilities. Diminishing natural resources is one cause, as is the dominance of certain markets such as the IoT, automotive and smartphone industries taking away component shares from less profitable markets.
Add to this the restrictions on employee numbers, travel and trade imposed by the COVID-19 pandemic and the resulting backlog of orders, and you have a perfect storm of conditions to cause a component shortage.
How can hard-to-find components be sourced?
There are several ways in which businesses can change their approach to procurement in order to work around these difficulties.
Diversifying the supply chain is one way that may help businesses source hard-to-find components. If all of your suppliers (including backups) operate exclusively within the same regions, then they are likely to face the same struggles as each other when it comes to sourcing components or materials. By using suppliers from different global regions, you may find that certain restrictions or limitations do not apply.
Use strategic sourcing
Strategic sourcing is an approach that aligns all procurement activities with the current market while also minimizing risk to the supply chain and securing the lowest total cost. This strategy is particularly beneficial in times of market volatility, such as during the pandemic.
Strategic sourcing is dependent on continual revaluation of the current situation and making procurement decisions based on that data, meaning that your approach is one of continual readjustment, rather than a complete overhaul in response to the unexpected.
Use sales forecasts
Working with a trusted strategic partner on sales forecasts allows you to predict your component needs well in advance, using real data to make informed decisions. If your sales history shows a pattern of when certain products are most popular, you can anticipate that you will need the components to make those products at similar times in the future. You can then place orders with your suppliers in enough time for them to source your components in the volume you need them and have them ready on schedule.
Look at alternatives/redesign
Sometimes, even with the above methods, it won’t be possible to source the desired components within the desired timeline. In these situations, you may need to look at similar alternative components that are more readily available or redesigning your products to not require the component in question. Of course, this is not a quick process, so it is worth looking at whether product redesign is possible while you still have the parts to make it traditionally.
While the external conditions of the market may be out of your control, your procurement methods are not. Hard to source components can cause serious headaches for manufacturers, but adapting your approach to supply can be the key to finding workarounds.
About the Author
Jeff Brind is the Chief Information Officer at Rebound Electronics, a privately-owned independent electronic components distributor experienced in supply chain management.