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Supply chain resilience (SCR) might sound like something only consultants and big corporations talk about, but it’s worth understanding, no matter how big or small you are.
Let’s face it—supply chains are not the most thrilling topic, especially when you’re an engineer or startup innovator focused on getting things built, not juggling logistics. But if you’re sourcing electronic components for your prototypes, first runs, or production lines, you don’t get a free pass.
So, let’s break this down into what you actually need to know—a simplified version.
What Is Supply Chain Resilience?
Supply chain resilience is the ability to withstand shocks in the supply chain that limit availability.
Traditionally, “shocks” bring to mind earthquakes, typhoons, and other disasters. In reality, for your purposes, a supply chain shock could be far more mundane:
- A component becoming obsolete overnight.
- A supplier suddenly running out of stock.
- A critical part moving to a 30-week lead time.
Your supply chain is the distributor and manufacturer network that ensures parts get to you. For some components, there might be half a dozen distributors with ample stock and short lead times. In those cases, your supply chain resilience is solid.
But what about a part where stock is scarce, lead times stretch endlessly, and there’s no obvious backup? That is a supply chain resilience problem.
Should You Worry About Supply Chain Resilience?
Here’s a simple test: if you answer “yes” to any of these, you need to care about SCR.
1. The Consequences of Failure Are High
Think about your project.
Could a delay mean:
- Failing to deliver critical prototypes?
- Damaging your reputation or relationships?
- Missing revenue goals that keep your company alive?
- Financial penalties, such as in government contracts?
- Layoffs triggered by production stoppages (especially in regions with strict labor laws)?
If the stakes are that high, resilience isn’t optional.
2. Your Demand Planning Window Is Short
Do you have low visibility into future needs?
This might apply if:
- You operate a “build-to-order” model.
- You’re cash-constrained and can only procure parts right when you need them.
- Your market is volatile, and forecasts are unreliable.
3. Your Margins Are High
Here’s where things get really frustrating. If you’re selling a million-dollar machine, and a 10-cent capacitor stops production, you’ve just lost big sales over a tiny component.
The same goes for high-value IoT products, where the real value is in the software. Don’t let a cheap, hard-to-source part bring your high-margin success story to a screeching halt.
Am I Resilient? How to Find Your Weakest Link
Let’s remember one word here: chain. Your supply chain is only as strong as its weakest link. Your design needs every single component, missing just one shuts down production.
The good news? Supply chain resilience can be measured. Think of your resilience as a swimming pool:
- The deeper the pool, the more resilient you are.
- Depth, in this case, is measured in Days of Supply (DOS).
How to Calculate Days of Supply
We need to do some math:
1. Estimate your maximum annual usage for any given part.
2. Divide that number by 250 (average working days per year). This gives you your average daily usage.
3. Add up:
- Your current inventory (raw stock, work-in-progress, or finished goods—whatever’s easiest to track).
- Inventory at franchised distributors (or self-distributing manufacturers). Ignore brokers; their numbers are unreliable.
4. Divide the total stock by your average daily usage.
Example:
Let’s say the most you expect to need of a part in a year is 1,000 units.
- Daily usage = 1,000 ÷ 250 = 4 units per day.
- You have 50 in stock, and there are 10,000 available through distributors.
Days of Supply = (50 + 10,000) ÷ 4 = 2,512 DOS.
This part is swimming in supply; don’t worry about it.
How Deep Is “Deep Enough”?
Well, it just depends. Like building a swimming pool—3 feet deep or 6 feet deep—it comes down to your preferences. The more critical resilience is to you, the deeper the pool should be.
Here’s a conservative guide you can use as a baseline:
- 5 Years (1,825 DOS): If you’re working with high-margin products or mission-critical parts, aim for a deep pool. Anything over 5 years’ supply, and you can stop worrying.
- 1 Year (365 DOS): If you have just one year of supply in the chain, it’s time to start paying attention. It won’t take much disruption to put you in a hurt locker.
- Below 60 Days: Start thinking seriously about mitigations—like increasing your stock and setting minimums in your ERP system to maintain the level.
Quick Tip: Don’t get too wrapped up about component lead times. Published lead times are notoriously unreliable and change frequently. Even worse, they depend on order volumes, which are never disclosed. Unless the lead time is below 4 weeks, you cannot bank on it.
What Next? Bringing It All Together
1. Identify Your Weak Links:
- Calculate the DOS for each critical component.
- Any part below your target depth (e.g., 1 year, 5 years) needs attention.
2. Mitigate Where It Matters:
- For low-DOS parts, consider boosting your inventory or setting procurement thresholds to avoid last-minute shortages.
3. Rinse & Repeat
- Things change, so reassess at least every quarter; monthly is the best practice.
Cofactr’s Sourcing App Can Do This
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Proactive Supply Chain Management:
- Get early warnings about end-of-life components
- Predict stock shortages before they impact production
- Monitor supplier quality and delivery performance
- Receive intelligent alternative recommendations when needed
Perfect for critical industries, contract manufacturers, and hardware companies that can't afford supply chain surprises.
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Remember: Supply chain resilience has a cost. But not being resilient? That can cost you much, much more—reputation, sales, and even your company’s survival.
You don’t need to become a supply chain resilience expert overnight, but knowing the basics gives you an edge. Start tracking your supply pool, prioritize resilience where it matters, and make sure the smallest parts don’t cause the biggest problems.
For now, focus on identifying the weak links. Future articles will cover how to address those risks effectively.