Over the past few years, the global supply chain for electronics components has become increasingly unstable. In 2020, this was further compounded by the outbreak of COVID-19 which saw supply chains bottle neck as consumer demands intensified against a stationary industry. As demand continued to grow, the market responded, and component prices and lead times rocketed.
In late 2021, there were signs of recovery, and it was hoped that this year would be the industry’s bounce back year. But the war on Ukraine and COVID-19 outbreaks in China, which resulted in further lockdowns, caused disruption to an already fragile supply chain.
In “normal times”, we would expect most components to be available on a next day delivery basis. But in recent years, lead times have increased considerably and on certain components we are seeing lead times as high as 52+ weeks. So, what does this mean for electronic components and when will we see an end to shortages?
What caused the shortage?
- The automotive industry
The rise in smarter cars creates an avenue through which electronic components flow. The more high-tech cars become, the greater the reliance on electronics. Since large manufacturers can purchase and store components in bulk, the result is a lack of supply and increased component prices for other businesses and industries that need them. - Internet of Things (IoT)
As our homes become smarter, Bluetooth and WI-FI capabilities are installed in a higher number of household appliances such as smart speakers, heating systems and even light bulbs. With the number of connected IoT devices expected to reach 14.4 billion by the end of 2022, the size of this market has significantly impacted component availability. - Global influences
Perhaps the most obvious one is the outbreak of the COVID-19 pandemic which had an unprecedented effect on global supply chains. In addition, several major events such as port closures and back logs, a large fire at one of the main silicon chip manufacturers and a shortage of oxygen production used in manufacturing, further compounded the situation causing critical supply issues.
What can we do?
With business as usual still a little while off, what can we do until normal service is resumed.
- Adjust our expectations
With the market still volatile we must be realistic about costs. We should adjust to paying more for components and the inevitability that this will trickle down to consumer level. - Design with flexibility
Be more flexible in our design approach with strategies that allow for multiple component options. It may also be necessary to widen the pool of suppliers. - Improved forecasting
Get serious about forecasting. Consider usage for at least the next 12-18 months and purchase and store in bulk, where possible. - Secure stock in advance
It may seem simple, but it is often overlooked. As soon as the design and the BoM have been finalised, order the parts and components. Don’t wait until a project has started to place orders as increased lead times could cause delays. - Return manufacture to UK
Many companies are opting to reshore manufacturing processes to the UK to create a stable supply chain and benefit from lower shipping costs and time.
The electronic component shortage has been a long and trying challenge for supply chains and it is expected that delays on certain components could reach as far as 2024. But whilst there may still be some catching up to do, we are starting to see signs of improvement. In September 2022, the Global Supply Chain Pressure Index (GSCPI) recorded a decrease in pressures for the fifth month in a row. Though the decrease is broad based, these figures show that pressures are starting to fall back in line with more historical levels.
Over the past few years, we have worked closely with our customers to navigate the changing landscape of component availability by sourcing and storing the components they need to ensure they meet their forecasted requirements. If you’ve got a project you’d like to discuss, get in touch or call 0117 244 3000.
This blog originally appeared on the Cubik website. You can see it here.