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What to do when your supply chain is out of components?

We are experiencing a major market disturbance that affects the supply of components and materials on a global scale. Currently, there exists more demand for components than supply on almost every sector. This has happened before in specific component categories but never on such a large scale. A unique situation in the history of global economy and electronics. There is an urgent shortage of almost every kind of electrical, metal and plastic component. The reasons for this are clear but what about the solution?

The main catalysts are COVID-19 and climate change

Let’s go through the underlying reasons first. The COVID-19 pandemic has been a major factor in this development as anyone might have guessed. When it all started in China, factories were closed to get people to adhere to social distancing. At first, the effects of this were minor since the global demand quickly reduced at the start of the pandemic. However, after a while the demand for electronics skyrocketed. People around the globe were locked inside their homes and in desperate need for entertainment, work tools and gadgets.

Same was the case for example with the automotive industry. Factories began to reduce production to respond to the projected decline in demand. But the opposite happened and consumers wanted to drive around in electric cars instead of public transport. When the realization hit in, it was too late. The ramp-up of production would take painstakingly long.

The second major catalyst is global warming. Tough winter in Texas, flooding in Germany, draught  in Taiwan, forest fires and storms, the list goes and so do the effects on the production of components.

Critical challenges facing manufacturers

Currently, high-demand components are being manufactured in bulk. This means that low-demand components suffer and the delivery times can be well over 12 months. The production of components is based on predictability and component suppliers rely on predictive manufacturing strategies to satisfy future demands. This means that it will grow increasingly hard to procure low-demand components in the near future. Moreover, big buyers have more market power and will continue to have priority over smaller buyers. There can even occur situations where bigger buyers can cut in and essentially leapfrog smaller buyers. Even when contractual agreements are broken by the supplier, the sanctions are well worth the breach.

If the above occurs, the best case scenario for the smaller manufacturer can be a major delay in go-to-market schedule or in worst scenario going out of business. All this due to a small component that is nevertheless critical for their product.

Solutions for the shortage of components

Fortunately, it isn’t all doom and gloom. There exist solutions for this challenge. It is critical to have a solid procurement strategy from the start of product development. When one supplier is unable to deliver components there has to be another way of procuring the critical components. This is called second-sourcing and it has already been a best-practice among successful manufacturers. Another way of navigating the shortage of components is to redesign the product with components that are in supply. All this requires a contingency plan that an engineering firm like Etteplan can provide.

Etteplan component engineer service can help you navigate the shortage of components

With Etteplan component engineer service we can help you with the shortage of components in three ways: component based risk-analysis, second-sourcing and redesigning your product. By doing a component based risk-analysis our component engineer can evaluate the risks related to the procurement of your required components. This is done by cross-referencing your part catalogue with component databases to figure out the supply levels of different components and to give risk values to every component. Whenever possible, second source suppliers are sought for new components to ensure availability and improve the bidding power of the customer.

In the case of unavailability our component engineer will propose alternative components and suppliers and find replacements for your critical components from the market. If the shortage of components is so severe that no replacements are available, Etteplan can help you with redesigning your product with available components. By taking account for every eventuality, Etteplan can mitigate the risk of component shortage and shorten your time-to-market.