The Covid-19 pandemic has brought about unprecedented disruption resulting in chaos and disorder in the supply chain. The speed at which consumer demand and shipping logistics have changed over the past year has forced organizations to rethink their approach when it comes to building resilient supply chains for the future
OEMs and EMS are once again being challenged to devise innovative and unique strategies to streamline their supply chains to prevent similar problems from happening in the future.
Uncertainty over the demand predictions needed to drive supply-chain decisions pose a major challenge for electronics manufacturers. This problem, coupled with evolving consumer behaviour fuelled by the pandemic and the global chip crisis greatly complicates demand forecasting, upon which components supply chains rely.
Furthermore, companies don’t always have access to the real-time data necessary to predict unexpected changes in customer demand. For example, in demand planning for manufacturing of electronic components, it may take weeks or months to respond to market changes in consumer behaviour, which often results in overstocking and even waste.
Another problem arising from supply chain volatility is that component manufacturers often scale up production to respond to surging demand thereby failing to guard against a bullwhip effect.
The bullwhip effect describes how small fluctuations in demand can snarl up the supply chain, causing bigger and bigger swings in production. The phenomenon can lead to the rapid expansion of manufacturing capacity, including accelerated procurement of raw materials, labor, and warehouse space, as companies race to ramp up supply.
Since long lead times are required to build capacity and significantly increase output, manufacturers risk being left with excessive inventories if the demand stabilizes quickly before their production reach peak capacity. At that point, small shifts in consumer demand can once again create big shocks to the supply chain thanks to the bullwhip effect.
All this means that OEMs and EMS need to closely evaluate sharp upticks in demand, or else they risk creating unintended overstock situations followed by recurring shortages.
For more information about the bullwhip effect, have a look at these articles: Bullwhip effect - History and solutions and Bullwhip Effect: 4 simple ways to crack it
Effective supply chain management in the electronics industry is a lot of work, especially in times of crisis. Companies are often trying to stockpile components to last them through the crisis. But hoarding further distorts the demand signals, thereby snarling up the supply chain further. So, how can OEMs ensure that the supply chain bottlenecks the industry has grappled with in recent months do not happen again?
Without question, it is clear that component manufacturers need better visibility and forecasting within their supply chains. More information from more tiers of suppliers and accurate forecasting of demand and market changes could significantly help manufacturers mitigate shortages or avoid an oversupply of parts.
Even so, to avoid the knock-off effects of supply chain volatility such as excess inventory, shortages, and even waste, OEMs and EMS need to figure out how to stabilize their supply chains. One way to achieve that goal is to integrate fragmented supply chain networks into a unified system to provide greater visibility and management within the electronic components supply chain system.
A disjointed supply chain is the root cause of inefficiencies and problems of counterfeit parts that manufacturers often have to deal with. Nowhere has this been more apparent than with shortages of computer chips. As the chip crisis persists, companies have found themselves not only overwhelmed with chip orders but urgently in need of electronic components to stay afloat.
The shortage has also led to profiteering as brokers jump to fill the void left by a panicked market resulting in price-ups and counterfeit parts infiltrating the supply chains of genuine components manufacturers. Never has the global electronic components supply chain looked so disjointed.
AIRENC is a unique peer-to-peer transaction platform that brings together electronic components community into a common trading network to facilitate direct buying and selling of electronic components at competitive pricing. AIRENC simplifies components purchasing and procurement processes, thereby enabling OEMs and EMSs to detect signals from the electronic components market and better anticipate their supply needs.
Components manufacturers stand to gain immense value from joining this community since it allows you to respond to any disruptions in real-time through your connections in the network.
However, it’s not just about visibility. AIRENC also plays a big role in ensuring standardized procurement processes and offering comprehensive audit trails for parts to enable community members to build trustworthy relationships and transact with confidence.
In today’s climate, taking control of the supply chain has never been more important to the electronic components industry. AIRENC empowers OEMs and EMS to build a seamless supply chain by connecting trading partners through a unique platform for collaboration and trading of electronic components at a fair price.
With AIRENC, OEMs and EMS can:
• Stabilize their supply chain by limiting emergency situations, improving product quality and better anticipating market changes.
• Reduce their costs by purchasing components on the aftermarket at competitive price and by.
• Value their overstock, limit component waste and improve their brand image.