Prepare for Tight Supply of Mil-Spec Connectors

Update includes statements from ITT's Interconnect Solutions business and Amphenol.

Buyers of mil-spec connectors could face short supply of certain mil-spec products due to recent stop shipment orders issued by Defense Logistics Agency (DLA) Land and Maritime. This could also translate into millions of dollars of connector inventory sitting on distributor shelves that can’t be shipped, and potential product delays for customers.

DLA issued stop shipment orders to Amphenol Aerospace and ITT Cannon in March and February 2016, respectively, for several types of mil-spec connectors due to sourcing components from unapproved facilities. On February 29, Amphenol disclosed to DLA Land and Maritime that they had been sourcing components for mil-spec connectors from unqualified sources in China. In addition, Amphenol was delinquent in testing to retain mil-spec qualification. Subsequently, DLA issued a stop shipment order for all affected mil-specs on March 1. These include MIL-DTL-22992, MIL-DTL-26482, MIL-DTL-26500, MIL-DTL-27599, MIL-DTL-38999, MIL-DTL-55302, MIL-DTL-83513, MIL-DTL-83723 products as well as FSC 5935 and VQP-16-030163 parts.

An Amphenol source states that “other Amphenol companies manufacturing to their own DLA QPL Manufacturing Approval, such as Amphenol Limited UK, Amphenol Socapex France, Amphenol Industrial India, remain unaffected for their own Manufactured QPL products to name but a few.”

Amphenol is one of the top five global connector makers, and industry sources peg its military connector share at about 50 to 60 percent.

Amphenol and Amphenol Aerospace presented a proposed corrective action plan to DLA Land and Maritime, according to DLA’s public affairs office. DLA told EPS that the action plan “is currently under review and consideration by DLA.” The plan likely includes re-sourcing and qualification of components currently manufactured in China, as well as the requalification to the applicable mil-specs.

These stop shipment orders also are significantly impacting the distribution channel. Industry sources say this could be “catastrophic” for the supply chain if the issues aren’t resolved quickly. As buyers of Amphenol and ITT Cannon move to buy from second sources, those manufacturers may not be able to keep up with demand, causing further disruption in the supply chain.

One distributor said the Amphenol stop shipment shut down every mil-spec connector that it can sell under the mil-spec part number. “I can mark it with an Amphenol commercial number but I can’t mark it with a mil- part number so that means half of our connector sales aren’t shippable, translating into millions of dollars of product that can’t be shipped.”

Other distributors agreed that it could cause a major disruption in supply if the issues aren’t resolved quickly. “Any time there is a stop ship, especially for a supplier that is large in the aerospace and defense space, it touches numerous customers, and it’s painful,” said Alan Bird, president of Arrow Electronics Inc.'s Americas components business. “Obviously, Amphenol is working diligently to work the issues. When you look at the industry it’s pretty significant. It’s going to put a dent in their revenue so they have to be working hard to resolve it.”

“If it becomes very prolonged it’s going to have an impact on the suppy chain and I would be surprised if their competitors didn’t step up and start filling that void because it’s an opportunity to increase their revenue and profit,” Bird added. “The length of time they’re on stop ship is going to be the litmus test in terms of how bad and how disruptive this is going to be.”

Buyers have three options to ensure supply, and it’s up to the customers to decide which avenue they want to approach, according to Bird. “They can wait for Amphenol to resolve their issue; look for alternative sources, which we will help facilitate, or a more costly option is a complete re-spin of the board. Most customers go with ‘let’s wait and see how bad it’s going to be’ then it’s ‘find me a second source’ because that is the easiest and least costly impact.”

Bird said most of Arrow’s customers are between option one and two, and are requesting that Arrow find as many crosses to these parts as possible, and to start looking for or purchasing inventory for them. The impact could hurt distributors that specialize in interconnects and specific vertical markets such as aerospace more than broadline distributors.

“This [Amphenol] is the largest DLA stop ship that our industry has ever seen. It is impacting almost every customer we touch,” said Andy Enright, director of operations at Electro Enterprises Inc., which derives 70 percent of its business from interconnect sales. “We have seen large and small customers already start looking for alternate sources of supply in anticipation that this will not be resolved overnight."

The first thing many customers are doing is eliminating the “Amphenol-only” on certain types of product, he added,

These stop shipments typically last a lot longer than the manufacturer first anticipates, said Enright. Even with Electro Enterprises’ strong inventory position, which is enabling the distributor to service customers previously buying Amphenol product with other sources, he believes the industry could start to see lead times stretch in one to two months. Typical lead times for mil-spec connectors today range from 12 to 18 weeks.

“Distributors right now are definitely trying to find alternate sources to supply to their customers, which will likely drive up lead times,” Enright added.

Another distributor noted that “other suppliers may be happy about it but they’re going to have a very hard time keeping pace with the demand.”

“This could last a long time,” Enright said. “Amphenol has to qualify new sources of supply, which takes time, and if the parts have to be requalified to QPL it could take months – six months to one year in the worst case scenario.”

Enright doesn’t believe a majority of the customers understand that it could take months to resolve, and “once they figure it out, the market will go crazy.”

The good news is that Amphenol is reporting no quality issues as a result of either sourcing subcomponents from China or delinquent or failed qualification retention testing. In a letter to customers, Amphenol also reported that it will be releasing GIDEPs with more technical details and recommendations. “Amphenol has made DLA explicitly aware of the massive disruption this order will have for industry supply chains. Based on recent GIDEPs from other manufacturers, as well as prior knowledge, Amphenol has also made clear to DLA that the issues cited above represent gaps across much of the industry,” the letter stated.

Similarly, ITT Cannon advised DLA on February 24 that it had included components manufactured in unapproved facilities in California and China in assembled mil-spec connectors. DLA issued a stop shipment order based on the disclosure, affecting three detailed part numbers for Series I under MIL-DTL-38999.

“ITT Cannon later advised us that the components of Chinese manufacture had been successfully quarantined and had not been assembled into finished goods. However, the components from the unqualified California source had been included in finished mil-spec connectors,” according to DLA’s public affairs office. “ITT Cannon remains under the stop shipment order and is working to ensure complete sourcing from qualified sources for all mil-spec connectors.”

"The stop shipment order relates to a machined component sourced from a California supplier. We’ve developed a test plan in coordination with the DLA to qualify the component sourced from this supplier and expect to be able to resume deliveries of the connectors in the near future. When we learned of this issue, we disclosed it to the DLA, as well as to our distributors and customers,” stated Tom Cruz, vice president and general manager, aerospace and defense for ITT's Interconnect Solutions business.

Buyers of these mil-spec parts, whether they buy from Amphenol, ITT Cannon or another manufacturer, need to start preparing for extended lead times or a short supply of product. Call your distribution partners to weigh out your options.