The connected world is growing at an exponential rate. Industries that have historically never had a need for electronic components are now fueling unparalleled demand. As a result, an ongoing shortage has gripped the industry as component manufacturers struggle to meet requirements.
Lead times are soaring, manufacturers are double or triple-ordering components in a desperate attempt to get ahead, and all the while the problem is getting worse. Surviving a shortage requires a deeper understanding of the problem, a measured approach, and the proper tools to succeed.
The State of The Shortage: Underlying Causes and Ongoing Concerns
Shortages are nothing new, and natural disasters like the recent earthquake in Japan has even forced some component manufacturers to halt production, causing problems across multiple industries.
We’re talking about components that, in some cases, cost less than a penny. While they are small in stature and price, these shortages are threatening global supply chains. Why is that?
The answer is simple: these components are in higher demand now than they’ve ever been. Constantly evolving products are using exponentially more components with each generation.
Couple this with the rise of IoT and the electrification of the automobile, and demand is coming from more directions than ever before.
A Long-term and Sustainable Approach
Ongoing trends ensure that this issue isn’t something that will go away on its own. Automobiles are moving away from their roots and embracing modern software-driven solutions like driver assistance, safety systems, displays, and sensors. All of these things raise the requirement for additional components.
The IoT industry has also come out of nowhere and introduced millions of connected devices into the global market.
As lead times continue to stretch into the future, many manufacturers resort to double or triple-ordering components in an effort to stock up. This only exacerbates the problem and fuels the ongoing shortages.
It’s time to start thinking about long-term solutions:
- Identify alternate components that match FFF (form, fit, function)
- Forecast demand based on sales data
- Avoid panic buying
- Utilize Industry resources (guides, best practices, etc.)
- Communicate with your suppliers
- Eliminate single-sourced parts
- Stay agile and aware
Several manufacturers have risen to the occasion, providing guides to help engineers understand their options. Ultimately, there aren’t many things you can do as a manufacturer to end the shortage, but you can become part of the solution instead of the problem.
True solutions in a shortage like this come from strong communication with your suppliers, and tools that keep your organization aware and agile.
Looking at The Shortage From The Supplier’s Perspective
During a shortage, all of the pressure is on suppliers to deliver. The reality, of course, is that there’s not enough to go around. Every shortage is a different beast, but the one we are in right now is centered around limitations in production. We have plenty of raw materials, but the speed of production is not fast enough to meet demand.
In a situation like this, it’s important to place yourself in the shoes of the supplier and look at it from their perspective. You should already have a strong line of communication with your supplier. During a shortage, constant communication with them will be key to everyone’s survival.
Your supplier may work with several other manufacturers. A certain percentage of allocation will be assigned to each customer. Ultimately, your relationship with suppliers will decide how much flexibility they offer during shortage season. Once you’ve established an agreement surrounding their production roadmaps, you can adapt that to your own product designs.
Constant communication, combined with flexibility in your own production will allow you to align your plans with the capacity of your suppliers. Keeping their limitations in mind will allow you to set expectations accordingly. If you do happen to hit a roadblock in your sourcing, this is where modern tools can step in to fill the gap.
Harnessing The Proper Tools
Connecting your BOM to the realm of big data opens up a wealth of possibilities for surviving the shortage season. With Findchips, you have immediate access to real-time inventory from your preferred list of suppliers.
Findchips’ alerts feature also allows you to set inventory alerts to be automatically notified when stock becomes available for specific parts. When all else fails, Findchips gives you the tools and the knowledge you need to not only survive the shortage season, but thrive long into the future.