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Electronic components buyers, distributors and manufacturers have dealt with an unusually high number of supply chain challenges in 2021 and the light at the end of that tunnel has yet to be illuminated. The ongoing global pandemic, labor shortages, transportation snarls and supply chain disruption have all made the process of getting goods from point A to point B difficult and time consuming.
“Global supply-chain bottlenecks are feeding on one another, with shortages of components and surging prices of critical raw materials squeezing manufacturers around the world,” the Wall Street Journal reports. It blames a faster-than-expected global recovery combined with the pandemic for creating much of the problem.
“Factories and retailers in Western economies that have largely emerged from lockdowns are eager for finished products, raw materials and components from longtime suppliers in Asia and elsewhere,” WSJ explains, adding that Asian countries still dealing with lockdowns and restrictions are struggling to keep up with demand. “Meanwhile, global labor shortages, often the result of people leaving the workforce during the pandemic, are throwing further obstacles in the way of producers.”
No End in Sight Yet
As availability of certain electronics components ebbed and flowed throughout 2021, the semiconductor chip shortage was especially persistent and enduring. Now, the CEO of one semiconductor maker is saying that dearth could extend through 2022.
“Right now, every single end market for semiconductors is up simultaneously; I’ve been in this industry 27 years, I’ve never seen that happen,” said Marvell’s Matt Murphy at a recent industry event, as reported by CNBC. “If it stays business as usual, and everything’s up and to the right, this is going to be a very painful period, including in 2022 for the duration of the year.”
And while several chip producers have announced plans to expand factory capacity, the positive impacts of those moves may not kick in until 2023 or 2024. “We’ve always gone through cycles of ups and downs, where demand has exceeded supply or vice versa,” AMD’s Lisa Su said, according to CNBC. “This time, it’s different.” Su expects the first half of 2022 to be “likely tight,” but says the second half will be “less severe” as manufacturing capacity opens.
Navigating the Storm
Not just a short-term crisis, the global pandemic has lasting implications for the world’s supply chains. To address current challenges while also planning ahead for the future, companies are rethinking these critical networks and looking for ways to build long-term resilience into them.
This requires holistic approaches to supply chain management, Accenture points out. “Companies must build in sufficient flexibility to protect against future disruptions. They should also consider developing a robust framework that includes a responsive and resilient risk management operations capability.”
Accenture sees applied analytics, artificial intelligence (AI), machine learning (ML) and end-to-end supply chain transparency as some of the key tools that will help companies emerge from the current disruption stronger and more resilient. Some of the global consultancy’s top recommendations for companies right now include putting people first (i.e., keep your workforce healthy and productive); leveraging data to improve visibility; prioritizing based on demand; and running simulations to predict when and where excesses and shortages are likely to occur.Strong Relationships Count
Strong supplier relationships have become table stakes during the pandemic and serve as a solid foundation for battling the ongoing supply chain disruption. By being proactive versus reactive and sharing future plans with distributors and manufacturers, procurement professionals have been able to shift over to having more “tactical” alignment with these providers.
“When your relationships are tactical, it’s easy for the supplier to move you to the bottom of the list when capacity is extremely tight,” Sourcing Industry Group’s Dawn Tiura tells CIPS’ Supply Management magazine. “When it’s strategic and concrete, the dynamics shift.” She tells buyers to work with suppliers to understand what’s most important to them, knowing that this “give and take” may result in a better outcome at some point in the future.
Learn more about navigating supply chain shortages here.
