In 2018, Samsung (a semiconductor manufacturer) announced plans to slow down production because it forecasted a decrease in demand of memory chips. This is a typical example of how manufacturers misjudged the situation amongst other factors from 2017 creating a tidal wave of shortage after covid-19 pandemic to date which experts claim might take up to 2022 to catch up.
What is causing the chip shortage?
As mentioned in the introduction, electronic parts shortage was predicted to go bad by industry supply chain experts even before covid-19 pandemic struck early 2020, this is a scenario I like to say, had been on the cards. Electronic parts finder oemsecrets.com analyst, Ben said that they have seen an increase of certain electronic parts being searched for more regularly that are linked to the production of goods in consumer electronics, technology, and automotive market i.e., computers, smart phones, auto and portable device production that certainly were readily available pre-2020.
Here are a few of the causes we unearthed:
- Poor planning
- Sanctions for trade on China by USA (5G technology)
- Covid pandemic
- Cloud computing (Demand increased for AWS, Microsoft) as people worked more remotely
Supply Chain Strategies for OEM businesses
The PC industry has been the biggest gainer during this pandemic with an increase in demand of 4.8% in 2020 according to Gartner data with predicted growth in 3 other technology industry in 2021: games console, headphones, and home automation smart devices. Before we highlight a few of the tips supply chains could use in general to alleviate future, we should mention that majority of the consumer products we use are packed full of semiconductor chips and since most semiconductor companies have gone fabless (they only design chips and forward the designs to fabricators or foundries), they do not have the capacity to increase production. If you reduce your order because you did not see increased demand you go to the back of the queue and wait your turn to get your order processed.
How can OEMs be effective post pandemic
1. Build relationships
Since supply chain sources are becoming scarce, gaining access to a group of different reliable suppliers for the same part is crucial as you have more avenues for acquiring a single part. This helps you make good friends and helps maintain schedule of your production.
2. Check lead times
Lead times often indicate how long it will take to get your order delivery on certain products. According to electronicscomponents.co.uk embedded systems engineer, Dan Dooley, on average it is taking them up to 14 weeks to get additional stocks from distributors to supply electronic components such as sensors and semiconductors in general for their small projects. They now must overstock parts and find alternative parts for most of their future product designs. Careful work around lead-times has helped them know when their products are ready to be shipped and this unfortunately has come at a cost to many businesses in relation to cost and revenue.
3. Connect loose ends on supply chain
Keeping the supply chain connected from product design to production is very important and this will avoid any unforeseen bottle necks thus avoiding disruptions in the project.
Every business needs to have strong hold of their supply chains and the main lesson from this is that most business cannot survive without business continuity planning.
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