The last month of the year is here, and that means it’s time to close out 2023 and start planning for what’s coming next in 2024. Having dealt with many changes and challenges over the last few years—as well as some new opportunities—electronics buyers can use this time to start preparing for the year ahead. This will not only give buyers a jump on their peers, but may also reveal certain issues that can be resolved proactively.
Things have been particularly turbulent in the semiconductor industry, where the “great chip shortage” that ensued during the pandemic is still impacting certain product categories. Automotive chips have remained in high demand, for example, and a shortage of chips needed to power tools like ChatGPT is still very much in effect.
“Semiconductor buyers have been dealing with shortages for over two years, but are now seeing a correction in the market,” says Kevin Larkin, director of sales – Americas at Fusion Worldwide. “Depending on which company you work for, or which commodity you support, you might be dealing with a different outlook moving into 2024.”
Buyers of semiconductors and integrated circuits (ICs) have also been managing shortages for more than two years now. This is another situation that could ease as we move into 2024.
“We’re seeing some correction within the semiconductor space now for a lot of buyers, which is a good thing,” says Larkin. “Things are getting back to what the ‘normal’ was, with buyers conducting yearly negotiations directly with manufacturers, executing on those buy plans and then leaving their supply chains up to the companies they pay to build their products, be it an ODM or a contract manufacturer (CM).”
Three Year-End Success Tips
Here are three steps that electronics buyers can take now to prepare for the coming months:
- Consider areas where you can move back to just-in-time inventory (JIT) management. Semiconductor buyers, in particular, may be able to start using JIT again as their distributors’ supply chains return to a more normalized state. This, in turn, will help companies preserve their budgets, guarantee their own production schedules and reduce their inventory carrying costs.
- Explore buffer stock or vendor-managed inventory (VMI) programs. “These programs allow companies to potentially have safety stock for upside demand,” says Larkin, who also suggests exploring safety stock as a way to hedge against price increases. A reliable distribution partner can help put these programs in place.
“Over the last few years, a lot of companies have come to realize that they need strong partnerships with companies like Fusion Worldwide to help them overcome their own challenges,” says Larkin. “We can also provide significant value when it comes to planning, cost reduction and safety stock that ensures that major price increases don’t impact your production.”
- Get out in front of system-level pricing on certain products. Thanks to rapid advancements in technology, graphics processing unit (GPU), central processing unit (CPU) and the memory space are in a state of flux right now. “Things are changing at a pretty rapid pace and we’re seeing companies like Intel end-of-life (EOL) some of their older products like Cascade Lake,” says Larkin.
“Typically, we’ll start to see some shortages and effects in the market for that trailing-edge technology.” To buyers that want to get out in front of these shifts, Larkin suggests getting ahead of pricing on system-level products, knowing that the law of supply-and-demand will set in quickly if those components become difficult to source.