Cost reduction strategies are always top-of-mind for manufacturers and buyers of electronic components, especially as shortages drive up prices and margins are razor-thin. Where can you find wiggle room or increase efficiency in the supply chain to save on component costs? Here are 8 tips for strategic cost reduction that can keep your business profitable.
1. Plan Ahead For Test Points
If you’re still in the design phase, you can save time and money by planning for quality control functions early on, before the design is set in stone. If it’s possible to keep all test points on one side of the board, this is a convenience that will create savings while resulting in a superior product.
2. Factor Long Lead Times Into Orders
Frequent disruptions in the electronic components supply chain have made lead times unpredictable and a great deal longer than they once were. If you need parts quickly, you’re bound to pay more. Plan to order well ahead of time if possible to avoid costly production delays or paying a premium on emergency orders.
3. Consolidate Your Sources
Diversifying is great for resilience and hedging your bets in an uncertain supply chain. However, it’s inherently less efficient to spread the work out amongst numerous vendors that must all be individually vetted and coordinated. Consolidating into few or even a single manufacturer can eliminate these hidden costs and prevent problems in production or quality control. Another option is to work through a single hybrid distributor like Sensible Micro to consolidate all of your communications and orders while helping you to maintain alternative source options and resilience in your supply chain.
4. Try to Use Off-the-Shelf Components
A custom solution gives you exactly what you need to match engineer vision to final product design, but can also add substantial costs and complications to your supply chain. Whenever possible, encourage engineers to work closely with their distributor to utilize off-the-shelf parts that will fulfill the product's needs and specifications.
5. Choose a Distributor With an In-House Testing Lab
This takes care of multiple strategic cost reductions in one fell swoop. If you can select a distribution partner that has an advanced in-house testing and inspection lab, you can place orders with the same partner who will verify the quality and authenticity of your components. This consolidates your relationships, helps you mitigate supply chain risks, gives you peace of mind about product quality, and allows for convenient custom test plans, all in one.
6. Avoid Single-Source Components Near EOL
These sorts of components could expose you to availability risks and escalating prices in the near future if they prove difficult to replace or there aren’t viable secondary sources. Keep your ear to the ground with a platform like Silicon Expert, which provides EOL and obsolescence notices and can also help you compare component options before finalizing your design. If you can’t avoid working with soon-to-be outdated or already obsolete technology, make sure you’re doing everything you can to plan for and maintain an obsolete inventory ahead of time through LTB stocking, purchases of surplus stock releases, and more.
7. Be Careful With Safety Stock
Stockpiling can be a good idea…until it isn’t. Be judicious with safety stock, because warehousing and overhead costs can add up. It’s important to safeguard your business against disruptions, but overbuying not only increases your own costs but can lead to the “bullwhip effect,” where downstream demand snowballs into even bigger overcorrections at upstream levels of the supply chain.
8. Deploy Anti-Counterfeiting Solutions Up Front
A little due diligence now can save you tons in the long run on substandard or suspect components. This has become even more true in today’s supply chain, when shortages are pushing many component buyers to turn to alternative and independent sources for the components they need. QA testing and anti-counterfeiting solutions can go a long way in strategic cost reduction and ensuring you get the right components the first time.
Sensible Micro is ready to help you deploy custom testing regimens or develop your own General Counterfeit Avoidance Test (GCAT) while sourcing the electronic components you need. Contact us today to let us know what you’re looking for and get connected with our globally trusted network of vetted suppliers.
