What to Do While Waiting for the Component Shortage to End
No one could say in the spring of 2018 when supply would recover. Alternate parts, a second distributor, longer planning and a manufacturing partner that tracks the parts on the bill of materials gave OEMs ways to keep building in the meantime.
If your products depend on electronic components, the component shortage was hard to miss in 2018. Memory was short, from DRAM to NAND flash, and so were passive components such as capacitors and resistors.
Much of the pressure came from new technology built in high volume. In May 2017, The Wall Street Journal reported that Nintendo was competing with Apple for NAND flash memory, LCD screens and small motors as demand for the Switch rose. Toshiba said demand for its NAND flash had been overwhelmingly greater than supply. Prices kept rising with demand.
1. Identify Alternate Parts
When you choose components for a product, identify alternates that can be swapped in if the preferred part becomes hard to source. Qualifying an alternate takes work up front, but it keeps a build moving when a part goes on allocation and its lead time stretches out for months.
Lead times were already long. In October 2017, EE Times reported passives suppliers quoting 20-week lead times, with thick-film and thin-film chip resistors out as far as 52 weeks.
2. Work with More Than One Distributor
Staying with one distributor out of loyalty can feel right, and talking to others can feel like a betrayal. In a shortage, though, a second or third distributor gives you another chance to get orders placed and delivered on time.
3. Plan Further Ahead
With demand still rising and no clear end to the shortage, the practical move is to adapt now and plan for the next one. Nothing rules out another shortage a few years from now.
Give purchasing and supply chain managers the tools and information to plan further ahead: longer forecasts, earlier orders, and a close watch on lead times for every critical part.
4. Work with the Right Manufacturing Partner
Keep watching industry trends, and choose a contract manufacturer that knows your scope and bill of materials and follows the status of every component on it.
Kodiak’s sourcing tracks the parts on each customer’s bill of materials, alerts customers to shortages early, and sources approved alternates when a part runs short.
Tight supplies were expected to last into mid-2018, longer than industry experts had first thought, according to the same EE Times report, and there was no telling what the rest of the year would hold.
If you plan builds for your organization, place orders early. Watch lead times and demand in your industry, and talk to your manufacturing partner about upcoming builds.