Supply chain disruptions: be prepared with real-time, integrated supply chain intelligence solutions

This supply chain intelligence blog was written by Chad Jackson, Chief Analyst & CEO at Lifecycle Insights, and comments have been provided throughout by Stephen Chavez, one of our own product marketing managers. Check it out and join the conversation below!

Component supply chain setbacks are becoming increasingly common. Electronics companies’ ability to resolve such disruptions is critical to success. When they can build in supply chain resilience, they can find ways to overcome supply chain setbacks and move forward without impacting the product development schedule.

Supply chain: preparing for the unexpected

Benjamin Franklin once quipped, “By failing to prepare, you are preparing to fail.”

We’ve all heard about the importance of saving for a rainy day or having an emergency fund in place for unexpected life happenings like medical emergencies or job losses. Some people even stockpile food, water, and other staples in preparation of a breakdown in the supply of basic goods and services.

During the COVID-19 pandemic, we discovered that supply chains disruptions can affect the most unexpected of products. Consider the great toilet paper shortage of 2020. Consumers rushed to markets to buy more toilet paper, but those stores could not stock their normal inventory. The stores had concerns about restocking and placed limits on the amounts of toilet paper a single consumer could buy. That led to more people wanting to buy toilet paper, even hoarding excess inventory. In this situation, a product that had historically been produced at a predictable margin and scale, was now suddenly impacted by unprecedented demand. Manufacturers couldn’t keep up. That, ultimately, deprived other consumers of this important product.

Sudden breakdowns in access to physical items that we take for granted—like food and fuel—can lead to unexpected second- and third-order effects. The disruptions are unsettling and often diminish confidence in suppliers and distribution systems. As a result, we find new ways to get our hands on the supplies we need. Companies are no different. They need to find innovative ways to prepare for the unexpected.

What’s next for electronics companies? 

Electronics manufacturers have been facing their own supply chain disruption over the past few years. Thanks to the pandemic and other factors, it’s much harder than it used to be to procure the components they need to build their products in a timely manner.

This component supply shortage has exposed the fact that most companies lack critical supplier insights and reliable inventory statuses from their main supply sources. As a result, they don’t have the supply chain intelligence necessary to make good decisions about what components to select for their printed circuit board (PCB) designs.

Component supply issues can be quite costly. Resolving these issues often includes time to qualify and acquire alternate parts. It can require spot buys and design respins, delaying product launch and affecting revenue.

There are significant gaps in electronics manufacturers’ access to real-time supply chain intelligence. These gaps need to be addressed so companies can better consider supplier risks as they make decisions about what components to select for their board systems. It is the only way to be prepared to manage the unexpected.

Is backup component inventory the answer? 

When component supply issues result in failure to fulfill product orders, the effects can be severe. Customer trust and future sales suffer—opening the door for competitors to pilfer the company’s business. We see this all the time in the consumer electronics space. But how can companies avoid product delays when the supply chain is so unreliable?

It might seem like forecasting, ordering components early, and building backup inventory is an ample response to any supply chain disruptions. But beyond the obvious outlay of cash required, this strategy carries additional costs. These include warehousing, transportation, depreciation, inventory shrinkage, damage, component end-of-life concerns, and other opportunity costs.

Companies need to do more than simply buy ahead. They need accurate supply chain intelligence to understand component inventories. They need to be able to see what is in stock, what’s in the pipeline, and what components might be at risk in transit. Such transparency enables companies to make decisions based on reliable, real-time information so they can make adjustments when the cost of change is lowest.

Backup component inventory may seem like a logical short-term fix to help manage supply chain issues. But it can also create an increase in demand from competitors. Companies may find themselves having to barter or buying and selling excess inventory with other organizations to get what they need.

Is supplier diversification important? 

As the industry moves into the post-pandemic economy, many electronics companies are shifting to diversify their approved vendor lists (AVLs). They are using insights to alert them to when component inventory may be unavailable or tied up in warehouses overseas. Companies now realize that relying on a single supplier significantly limits their ability to pivot when they encounter problems.

Having alternate suppliers mitigates future disruptions. Many organizations are learning that building supplier relationships offers opportunities to fulfill shipment orders even when one supplier has limited availability of a specific component or has been temporarily disabled.

Researching and planning for alternative suppliers in advance strengthens companies against supply chain disruptions. Then they can avoid expensive spot buys and maintain their profit margins.

Technology is an advantage 

New supply chain technologies are needed to help electronics manufacturers lower their operational costs and make their component sourcing processes more flexible. Particularly, companies need to be able to make data-driven decisions that keep them one step ahead of supply chain disruptions.

When organizations have access to supply chain intelligence, inventory alerts, and forecasting information, they can avoid potential obstacles. Real-time information on component inventory levels enables them to manage disruption and adapt to ensure fulfillment using one central data source. This kind of technology aids in inventory planning and helps organizations prevent unexpected out-of-stock emergencies.

Systems that provide low stock alerts and forecast supply chain disruptions and shifts in customer demand are critical to success. Companies that invest in an integrated supply chain solution—with access to tools and features that promote a seamless experience—can continue operations even when supply challenges arise. This kind of solution offers a competitive advantage that can make electronics manufacturers stand out from their peers in the marketplace.

Be prepared 

Component supply chain disruptions are not slowing down, so electronics manufacturers need a proactive approach to sourcing the parts needed for their PCB designs. By investing in solutions with built-in, real-time supply chain intelligence, these organizations can respond to disruptions before they become too costly. These companies will then save time and money as they create and build their products—and can differentiate themselves from their competitors.

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