Procurement professionals who were hoping for more “normalized” business conditions in 2023 didn’t exactly get what they wanted. Sure, the massive supply chain shortages that happened in 2021-22 have mostly subsided, but other challenges have since stepped into their shoes.
High inflation, rising interest rates and increased business costs are just some of the issues that companies continue to grapple with. “As the new year began, the volatility and inflation of the previous year showed no signs of abating. Some of the most important trends may persist well beyond 2023,” McKinsey predicts in Procurement 2023: Ten CPO actions to defy the toughest challenges.
“What’s more, the procurement function itself continues to face major changes that have made its traditional operating models obsolete,” the firm continues. “Front-running procurement organizations are increasingly distancing themselves from the rest of the pack, deploying their talent, capabilities, technology and insights into the world’s complexity in ways that propel them far ahead of the rest of the pack.”
In its 2023 Key Issues Study, The Hackett Group says supply continuity remains the top procurement priority for 2023. Spend cost and digital transformation also remain among the top five priorities for 2023, while combating inflationary price increases moved up the list to number two.
“Improving analytics and insights and capabilities also rose several spots as organizations realize the importance of being able to support more predictive, prescriptive and intelligent decision-making to tackle challenges like inflation and supply continuity,” the company points out.
Addressing New and Emerging Concerns
With the first half of 2023 now squarely in the rear-view mirror, procurement professionals are looking at what the second half will bring. David Stein, vice president, semiconductors at Digi-Key, says the sales increases many companies experienced over the last few years have since “leveled off,” and that organizations are focused on longer-term stability and sustainability.
“Most of the supplier network has dug out of the capacity constraints they felt over the past 30 months. Lead times on most products are back to pre-pandemic levels,” Stein adds. “There are still small pockets of challenges that exist on products that support end markets—such as electrification, automotive and data centers, to name a few.”
Stein says many suppliers have returned to releasing new products and technologies this year, and that those companies’ engineering resources have shifted from “panic” mode to one that’s focused on future new product introduction. “This has definitely had a positive impact on the number of new design starts we’re supporting from the global engineering community,” says Stein, who is bullish on the long-term outlook for the electronics supply chain.
Six Tips for Success
For electronics buyers who are addressing their current challenges, and also preparing for any new issues or opportunities that may emerge during the second half of the year, Stein offers these success tips:
- Anticipate supply chain issues. Read the market and make good buying decisions based on that intelligence.
- Establish strong distributor relationships. Developing strong relationships with your suppliers makes good fiscal sense and provides more stability in turbulent times.
- Secure stock on shortage parts. Take this step during the initial design stages. Wherever possible, design with a couple of options to make your approved vendor list (AVL) as flexible as possible at the line-item level.
- Get quotes and understand commodity cost. Understanding your commodity spend and bill of material (BOM) costing will help determine where to spend your time in quoting and pricing negotiations.
- Schedule shipments for frequently purchased parts. the more visibility you can give to your supply chain partner, the better your own company’s chances of success.
- Review processes and seek out efficiencies. Find suppliers that focus on supporting the entire BOM. “A lot of buyers recognize value in aggregation, mainly because they don’t have to place five orders with five different suppliers,” says Stein.
