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Everyone who has shopped for a new vehicle or appliance over the past few years should be aware of the supply chain problems created by the COVID-19 pandemic. The pandemic not only tested the resilience of established systems but also highlighted the vulnerabilities inherent in global manufacturing and distribution networks. Arguably, the biggest impacts were felt in the semiconductor sector and in the electronics industry more broadly, and the problems created by lockdowns led to reshoring of production capacity.
In the meantime, OEMs and CMs have had to reflect on the lessons learned from the past three years. New strategies for managing orders, finding components, planning production schedules, and holding inventory are warranted in order to adapt to a post-pandemic reality. Recent trends show that the industry is on the right path to recover and withstand the next global supply chain shocks.
Most Important Supply Chain Lessons From COVID-19
Every company is different and will have varying production priorities, but the overarching supply chain problems span across any company that needs to procure electronic components. Due to lockdowns and labor shortages, it also became difficult to manufacture at required volume and with reasonable lead times, even if parts could be procured. Part of the issue was one of massive supply-demand imbalance, yet also part of the issue was geographic concentration of production capacity and inventory.
Based on these well-known points, there are key lessons to learn from the supply chain situation of the COVID-19 era:
- Don’t rely on just-in-time supplies to hold you through repeated production runs
- The most important components should be procured early and held before production
- Geographic diversification of sources helps ensure production can be sustained
- Diversification of production location helps companies ensure stable supply
- Be prepared to produce multiple variants when preferred parts go out of stock
Knowing the supply-side problems created by lockdowns and economic stimulus is one thing, but what’s more important is having a strategy to deal with these challenges. Supply chain professionals are now taking a more proactive approach to sourcing to ensure their products can be brought to market sustainably.
Improved BOM Management
BOMs for production runs are the point where the supply chain meets assembly requirements. Improved BOM management processes and supply chain platforms are making variant management much easier so that production can be sustained despite shortages. In the past, you had multiple platforms for viewing the BOM, locating suppliers, executing orders, tracking orders, and finding alternative parts. Today, unified supply chain platforms are easing management of BOMs for a design + variants.
Purchase Early
Since the breakdown of just-in-time supply chains, it’s in a company’s interest to purchase their most important parts early. These are typically the parts that enable the main functionality in your device, or the parts that have few replacements. Early purchases of sufficient parts to sustain a production ensures a company can get their product to market despite a last-minute inventory depletion. In the case where parts go out-of-stock or suddenly go EOL, the design team can plan ahead on a new revision and, ideally, provide sustained production with an alternative design.
Purchase From Anywhere
The major trend in the pre-COVID era was to sole-source everything from a single vendor that could procure all parts needed for an assembly and ship finished products to anywhere. COVID-19 and the later geopolitical situations in 2022 illustrated the risks of this strategy. Geographic diversification is all about producing in more than one location, as well as procuring components from more than one location, distributor, and parts manufacturer.
For electronic component purchases, turning to multiple distributor sources and multiple manufacturers (often with multiple compatible PNs) is a less risky strategy compared to managing a broker network. For manufacturing services, this would mean producing in more locations rather than from a sole source in Asia. This gives the added advantage of producing closer to the end customer, which reduces shipping and logistics costs.
Better Platforms for Supply Chain Management
When the just-in-time supply chain from single sources breaks down, supply chain managers are forced to look elsewhere for components and production capacity. But without access to complete supply chain data, implementing an alternative strategy is time-consuming and difficult.
Today’s 3PL providers and supply chain management platforms are doing much more than holding inventory and coordinating shipping. The electronics industry’s best platforms provide real-time visibility into the supply chain with inventory data, pricing information, and point of origin data across distributors. Adopting these supply chain platforms into the sourcing process
- Budgeting: Pricing data across multiple BOMs for variant designs with alternative parts
- Shipping: Capability to see inventory by location with visibility into broker networks
- BOM management: BOMs for design variants and BOMs with alternative components can be created and ordered instantly
- Watchlists: Capability to receive notifications when inventories change, prices change, parts ship, etc.
These are just a few of the important lessons electronics manufacturers, OEMs, contract manufacturers, and small design firms have taken from the COVID-19 supply chain shocks.
If you want to automate your procurement processes and sourcing management, you need an ITAR-compliant platform like Cofactr. Electronic design teams and procurement professionals use Cofactr to quote, purchase, manage inventory, and manage logistics for their electronic components. Cofactr also provides warehousing and logistics management services through its online platform.