The COVID-19 Crisis Has Demonstrated the Importance of Proactivity in the Electronics Industry

The past year has been incredibly challenging for everyone and the electronics industry has been no exception. Supply chains are especially susceptible to disruption because of the number of parties involved, and problems that affect any link in the chain has a knock-on effect. As we all begin to recover, here are the lessons we have learned about the importance of proactivity and how they can be implemented.

Disruption compounds existing problems

Before the pandemic, the electronics industry was already suffering from long lead times and widespread shortages on a number of components, such as MLCCs, due in part to the expanding markets of electric vehicles, IoT devices, smartphones and handheld computing devices.

Businesses that hadn’t already found a way to navigate these problems were hit even harder by the pandemic, as lead times were further increased by trade and travel restrictions and the urgent requirement of parts for medical devices put an even higher demand on already limited component stock. The proactive methods used to deal with these problems became useful tools once the pandemic hit and far surpassed any wait-and-see approaches.

Procurement activities need to be continually assessed, not fixed

Trusted suppliers are valuable assets in any supply chain, but continuing procurement in the same channels without paying attention to the market can be detrimental. Strategic sourcing is a great way to keep your purchasing activities in line with the current climate, as it relies on continuing assessment of the market. Any changes a business has to make in response to disruption then become adjustments, rather than a complete overhaul.

Alternatives and contingency plans are necessary

Similar to the above point, the pandemic highlighted the need for all OEMs and CEMs to have reliable backup suppliers for all their components. The business can be further safeguarded by diversifying and using suppliers from across the globe.

After all, travel and trade restrictions that disrupt one supplier are likely to disrupt all others that share the same borders and regulations. In addition to suppliers, it is worth considering alternatives when it comes to components for situations when the lead times on in-demand components become too problematic.

Streamlining reduces risk

The more suppliers you regularly use, the harder it is to maintain traceability. There is a higher risk of disruption and security breaches, as well as extra restrictions, such as minimum order costs, delivery limitations and lower purchasing power with your vendors. Implementing a vendor reduction strategy can alleviate all these problems, as well as potentially lowering your costs and increasing your purchasing power with the vendors you retain.

Forecasting can help navigate long lead times

Sales forecasting is a useful tool that encourages you to work with your suppliers as strategic partners to a mutually beneficial end. By using past sales data, you can estimate when your need for certain components (particularly those in high demand) will be greatest well in advance, allowing your suppliers plenty of time to make sure your stock is ready for that date. The better your sales are, the more components you will need from your suppliers, so forecasting is in everyone’s best interests.

Maintaining a steady cash flow is essential

Even when a business is forced to close temporarily, there are bills and wages that still need to be paid. With profits paused, cash flow becomes critical for the business’s survival. One area that many businesses may find to be a source of income is by offloading excess stock.

At best, the storage costs of holding the stock are an extra financial drain, but if those components become obsolete before they are used, then the loss is even greater. Returning excess stock to suppliers, trading with others in the industry or using it in alternate products are all potential options.

Make regular risk assessments

One final lesson that all businesses should take away from the COVID crisis is that risk assessments should be a regular occurrence and updated every time something changes, either to the business directly or the wider market. Identifying potential problems means that businesses can address them before they are exposed or exacerbated by unavoidable external disruption.

A proactive, flexible approach to supply chain management has always had significant benefits, but the past year has made it an essential methodology for businesses looking to recover and come back stronger.

Jeff Brind is the Chief Information Officer at Rebound Electronics, a privately-owned independent electronic components distributor experienced in supply chain management.