Why Transparency Matters During a Component Shortage

Lead times for scarce components kept growing through 2018, driven by demand from the high-volume consumer market and its appetite for the newest devices.

Small devices use a lot of parts. A single iPhone X used about 1,000 multilayer ceramic capacitors (MLCCs), against 300 to 400 in earlier smartphones, Supply Chain Connect reported in July 2018.

Parts makers were slow to add capacity. Some, burned badly before, were wary of it, The Wall Street Journal reported in August 2018. Per Loof, Kemet’s chief executive, said the capacity increases under way were lagging 18 months behind demand, according to Supply Chain Connect.

Lead times for some parts ran to six months or more, and some chip resistors had been quoted at up to 52 weeks, EE Times had reported in October 2017. A Stifel poll reported by EPS News in August 2018 found 14% of discrete suppliers quoting lead times of 26 weeks or longer, while some suppliers had stopped quoting lead times and put customers on allocation. The MLCC shortage was the most severe.

Prices were rising too, from the shortage and from tariffs. Kemet was raising MLCC prices and said it would charge customers to cover the added cost of tariffs, the same Supply Chain Connect report noted.

The questions kept coming: why capacity was not being added faster, how far prices would go, and when the shortage would end. With the market that volatile and fragile, transparency with vendors and customers mattered.

1. Sudden Change Is Hard to Accept

Unless you work at the center of the shortage, it is hard to understand how a part that was always available can suddenly disappear. Change is hard to accept in any circumstance, and harder still when a product or business depends on it.

Communicate clearly and as honestly as possible with everyone affected, from vendors to customers.

2. Going Dark Could Hurt Relationships with Vendors and Customers

Some weeks there is little new to report on the component shortage, but that does not mean communication should go dark.

Regular contact keeps relationships with customers, vendors and everyone else involved in good standing, whatever is happening in the industry.

3. Transparency Helps You Act Early

Honesty keeps relationships with vendors and customers in good shape. A commitment to transparency also pushes a business to share news early, so it stays ahead of problems instead of reacting when things go wrong.

4. It Keeps You Visible Through the Shortage

Between the component shortage and tariffs on products from China, it was easy for a supplier’s name to get lost in everything else going on. Communication and transparency also count when buyers choose a manufacturer or supplier.

Consistent updates on lead times, allocation and prices can make a business a source of news for its customers and the wider industry, and that strengthens those relationships further.

At Kodiak, transparency during a shortage starts with an early alert when a part on a build is running short.