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Utilizing Logistics for Success in the Electronic Component Supply Chain

Sept. 28, 2023
When they understand the “science” behind the electronics supply chain, buyers can better prepare their companies to manage the ebbs and flows in supply.
Paying close attention to logistics trends can be the differentiator between being ahead or falling behind in any supply chain, especially in the electronic component industry. In fact, companies that understand the logistics behind this industry are often best equipped to develop—and benefit from—resilient supply chain strategies.

“As the global economy moved into the 21st Century, logistics became a critical part of supply chain management and consumer demand,” Michigan State University reports in Why Logistics Is Fundamental to Supply Chain Success.

“In less than two decades, logistics management has influenced product movement to meet or exceed consumer demand,” it continues. “Companies saw they could lower costs and increase productivity by managing logistics on a system theory and managing the company as a whole to boost performance.”

Operating in a Dynamic Environment
The nature of the semiconductor supply chain isn’t unpredictable, it’s just always in motion. One day, securing allocation for a particular component can be a struggle as constrained supply rapidly transforms into a persistent shortage—this was a common experience during the years of the global chip shortage. However, the next cycle of supply and demand may cause the tables to turn, and companies quickly find themselves managing excess amidst a downturn in the market.

Industries like consumer electronics have seen inventory levels rise this year. Memory manufacturers have been forced to implement production cuts as oversupply impacted quarterly revenue. While these cycles may seem unpredictable and not easy to plan for, the reality is that these developments will nearly always surface as logistics change first. Knowing this, buyers who keep close tabs on what’s going on with the logistics side of the electronics supply chain will often be best positioned to act or react in a timely manner. This, in turn, translates directly into improved supply chain resilience.

For example, when lead times and pricing become unstable, this is a warning sign of possible underlying issues that, if ignored, could significantly impact business. Buyers can leverage that information and use it to make moves like building buffer stock, offloading inflated inventories, or taking advantage of cost savings opportunities well in advance, effectively staving off bigger challenges that may emerge down the road.

Utilize the Power of Market Intelligence
One way logistics contributes to supply chain success is through the data and information in market intelligence to create an informed, strategic approach.

Manufacturers are a valuable source of truth for upcoming developments. For example, when product end-of-life (EOL) notices are issued, companies must take stock of their inventories and ensure there is a stable supply to support production timelines until an alternative part can be identified.

Effective logistics planning is essential to navigating obsolescence. When Last-Time-Buy (LTB) becomes necessary, for example, having the right sourcing partner to ensure continuity of supply can make all the difference.

In addition, manufacturers provide robust market updates during their quarterly earnings calls. Readers or listeners can gain insights into what market segments are underperforming by paying attention to the sequential changes from quarter to quarter and, using those insights, can determine how supply may be affected moving forward (i.e., if the manufacturers plan to make changes to capacity).

As a bonus, manufacturers usually discuss forward-thinking statements on earnings calls. These predictions can give you a “sneak peek” into the overarching trends that may affect production-related supply.

Logistics Lead to Plans, Not Panic
Currently, a decrease in consumer spending is creating an environment where demand has waned for many components and finished products. Consider the logistical dependencies now so that you can be prepared for the future and start by reducing your dependence on multiple suppliers.

When you exchange an overcomplicated network for a handful of strategic partners and include an independent distributor in your supply chain network, you can both diversify your supply channels and mitigate operational risk. When searching for an open market partner, ensure that it has the supplier network and resources needed to be able to react quickly and intelligently to your company’s needs.

About Fusion Worldwide
Fusion Worldwide is the leading global distributor of electronic components and products. We source, inspect, test, and deliver a broad range of components to a large and diversified customer base that includes OEMs, CEMs, and ODMs across a wide array of verticals. Contact us today for a free valuation and cost comparison against your current program and start saving.

To learn more about inventory management solutions, visit fusionww.com and follow Fusion on LinkedIn.

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