While supply chains have (finally) started to normalize, there are still concerns on the horizon. For example, KPMG's 24th Annual Global Automotive Executive Survey revealed that 45% of OEMs outside of China have “extreme concern” about access to semiconductors. That’s an issue for automakers, especially when you consider that chip content per vehicle is growing by about 7% a year.
A Supply Chain Digital analysis of 2,000 programs and half a million components reports that the automotive industry has a risk score that is twice as high as other industries.
However, it’s not just the automotive industry feeling the pain. Semiconductor lead times have yet to fully recover to pre-pandemic levels, creating supply chain concerns for any sector that relies on semiconductor and electronic components.
For OEMs, traditional component sourcing methods are no longer sufficient. With risks at high levels, understanding supply chain shortages and strategies to overcome them have become mission-critical.
The Root Causes of Semiconductor Supply Chain Shortages
You can put the usual suspects at the top of the list for causes of electronic component shortages:
- Geopolitical tensions affecting production
- Scarcity of raw materials
- Fluctuating demand
- Increased production and shipping costs
- End-of-life components
- Long design-in cycles for new components
- Continuing supply change bottlenecks
However, there’s also a new threat. The surge in semiconductors for use in artificial intelligence and AI-enabled smartphones.
“Surging demand for graphics processing units (GPUs) has caused shortages in specific elements of the semiconductor value chain,” Anne Hoecker, head of the technology practice in the Americas at Bain & Company, told CNBC. “A demand increase of about 20% or more has a high likelihood of upsetting the equilibrium and causing a chip shortage.”
Bain warns that the rush to develop AI solutions could create significant chokeholds throughout the supply chain, leading to increased electronic component shortages.
5 Electronic Part Shortage Solutions for OEMs
Overcoming these challenges and positioning your company for success amid these challenges requires proactive parts shortage solutions. Even if your supply chain seems stable right now, it may not continue that way.
Key strategies include:
1. Diversify Supplier Networks
OEMs are increasing their efforts to diversify supplier networks from Tier-1 and Tier-2 suppliers. Establishing deeper relationships with suppliers across multiple regions reduces the vulnerability to localized disruptions.
Sourcing qualified suppliers before you need them ensures greater flexibility and can improve your negotiating power. Working with a certified electronic component distributor like Sensible Micro can help you uncover new sources and shore up your supply chain.
2. Optimize Inventory Management
The traditional just-in-time inventory model is giving way to more robust buffer stock strategies.
OEMs are reassessing their inventory management approaches, and implementing sophisticated risk assessment tools to determine optimal stock levels for critical components. This shift towards a just-in-case model requires careful balance – maintaining enough inventory to weather supply disruptions while avoiding excessive carrying costs.
3. Leverage Digital Transformation
AI and machine learning technologies are increasing the sophistication and accuracy of demand forecasting capabilities.
Advanced analytics can process market data and identify anomalies to predict supply chain disruptions before they occur. At the same time, real-time inventory tracking is increasing visibility into component availability across the supply chain to help get the balance right.
4. Deploy Alternative Sourcing Strategies
Success in today's market requires flexibility in component sourcing.
Cross-reference part identification ahead of time. When you know what alternatives or equivalent components meet your standards, you can move more quickly when part shortages arise.
OEMs are also increasingly designing their products with component flexibility wherever possible to alleviate single-source components that can shut down production lines.
5. Get Proactive About Risk Mitigation
All of this emphasizes the importance of risk management. While establishing long-term contracts with key suppliers can help prioritize delivery when supplies are limited, it can also lock you into a single source.
Proactive risk mitigation strategies should include maintaining diverse options to reduce dependence. Working with an independent distributor like Sensible Micro helps you leverage a global network of vetted sources with a single point of contact. This enables you to diversify your suppliers and manage risk more efficiently. You can find alternative semiconductor sources quickly while also getting an early warning for potential disruptions.
Sensible Micro: Your Trusted Distribution Partner
Partnering with Sensible Micro helps OEMs and EMS providers navigate difficult electronic component shortage issues. Our global sourcing team works two-fold; supporting critical shortages and utilizing global pricing for cost reduction opportunities on non-problem parts. Our rigorous quality assurance and testing capabilities ensure authenticity and reliability.
Sensible Micro's flexible inventory solutions adapt to your unique needs, supported by sophisticated market intelligence and forecasting capabilities. This combination of resources helps OEMs maintain production schedules even during severe shortages.
Whether there is a global shortage of parts or a glut of excess inventory in the market, utilizing Sensible Micro at the right times can enhance OEMs supply chains with a customized approach.. A proactive approach to component sources and working with trusted partners like Sensible Micro can produce a more resilient supply chain capable of withstanding market disruptions. We have millions of components in stock and available and deep relationships with global suppliers to help you support what matters most.
Take the first step toward supply chain optimization today.
Contact Sensible Micro to learn how our comprehensive sourcing solutions can help secure your component supply. And, stay informed with Sensible Micro for the latest industry trends.
