Jeff Brind on the importance of a flexible supply chain
The Covid-19 crisis has further proven the importance of flexibility for supply chains. All businesses have limitations that have become more apparent over the past 18 months. The businesses that have fared the best during this time are those that have been flexible and proactive to overcome difficulties, rather than trying to push through with their existing business model and weather the storm.
Businesses from all sectors have had to adapt, but issues of delays and manufacturing limitations have been piled on top of significant existing challenges for the electronic components industry, such as the US-China trade war and the continuing shortage of semiconductors and MLCCs.
There is no shortcut around these issues, but the challenges can be lessened by a flexible approach to supply chain management. Change to the market is inevitable, and those that work with a business model that allows adaptation are more efficient, resilient to future disruption, and have a better cashflow as production is less likely to halt.
How can you improve the flexibility of your supply chain?
Ensure you have reliable backup suppliers
Should your regular suppliers come into difficulty, then you need to have reliable backups in place for all your products so that production doesn’t have to come to a halt. Even if your primary supplier has never let you down before, the past 18 months have proven that nothing can be taken for granted.
Flexibility shouldn’t be confused with having a huge number of suppliers within your supply chain. Getting tied into contracts with many suppliers comes with many risks and increases the chance of delays, security breaches and procurement difficulties. Work with a few trusted, well-vetted suppliers instead.
Diversifying your supply chain is a great way to stay flexible. If there is disruption to the market, such as we saw with the Covid-19 pandemic, then travel or trade restrictions that come into place will affect all your suppliers who operate out of that area.
This means that, even if you have reliable backups, if they operate in the same jurisdiction as your primary supplier, they will face the same roadblocks and be of little use to you in sourcing difficult components.
If you diversify across different countries, then you are more likely to still have an active supply line for your components. You also may find you can get a better price than if you only use suppliers from one region.
Strategic sourcing is a procurement method that is built on flexibility. This is a process of continual re-evaluation and improvement of your business purchasing activity based on the current market. Strategic sourcing ensures you look past the lowest purchase price of individual products and instead focus on finding the best possible total cost.
Because this sourcing method responds directly to the market, it also provides more resilience against disruption. You are continually adjusting your procurement activities rather than overhauling outdated methods when they become untenable.
Invest in new tech
Some businesses may view investing in new technology such as AI and IoT systems as unnecessary, especially if they feel they have managed fine without them so far. However, these systems can hugely improve the efficiency of the supply chain by freeing up labour for more important duties, while administrative duties such as payroll and scheduling are automated. Automatic ordering technology can also make stock control much more reliable.
Another way you may need to be more flexible is with the components you use in your products. In many cases, this may not be possible, but with the shortage of semiconductors set to continue into next year, it is practical to see where alternative components that are more readily available can be used instead.
A flexible approach allows OEMs and CEMs to adapt to the current market, rather than being limited by it when conditions are not favourable. Those that resist change are most likely to suffer from it when it inevitably happens.
In tech-based industries, advancements that revolutionise the way products are manufactured can always be just around the corner, so it is essential to not stick too rigidly in one method of operation, or risk being left behind.
Jeff Brind is the Chief Information Officer at Rebound Electronics