In August 2017, Wally Johnson, vice president of finance at Firstronic, a contract manufacturer that produces electronic modules for automakers and tier one suppliers, wrote about the storm brewing in the automotive electronics supply chain.
“Industry professionals are seeing lead times on ‘passives’ — electronic components such as resistors, capacitors, inductors and transformers — stretch out to one year or more in some cases,” said Johnson.
Part of this looming shortage is attributable to how electronics companies are managing their inventories. It has been nearly a decade since the 2008 recession, but the pain is still remembered, and the tighter component inventory practices that companies started then are still in place.
Meanwhile, myriads of new products and applications have streamed into consumer and commercial markets—and most require passive components. These burgeoning volumes of electronics products and Internet of Things (IoT) accessories suggest that electronics companies can ill afford to think about tamping down inventory levels based on history over the past ten years.
“The passive component supply problem for electronics companies is even more far reaching than inventory control,” Johnson said. “One of the primary issues is that people aren't always listening. They want to do business as they’ve always done business, and they aren’t taking the time to look for new supply manufacturers or alternatives for passive components.”
Johnson said that as long as companies insist on using the same passive components from the same set of suppliers that they have always used, they will subject themselves to the potential of component stock outs that could delay product shipments and jeopardize revenues.
“Some of our customers send us bills of material and ask us whom they should use for passives,” Johnson said. “While others say they just don’t want to change.”
One issue that is prevalent today but wasn’t years ago is that companies lack personnel with depth and breadth of knowledge in material science. Johnson notes that this is especially evident at OEMS, which have divested away from the knowledge investments they used to make in passive components.
“Twenty or thirty years, ago, companies had persons in their employ who had doctorates in material science,” said Johnson. “They understood passive components to the nth degree, and they weren’t afraid to substitute one component for another when they needed to.”
Today, this knowledge is lacking, so there is hesitation in companies to substitute components. Johnson said that in most cases, the hesitation is unfounded. “As long as you use EEC qualified components, you will be ok,” he said, “You just can't put your head in the sand. You need to look for passive component alternatives if you’re going to stay on top of meeting demand.”
What steps can electronics companies take to ensure that they meet product demand and don't run short of passive components?
Design for alternative components
“You can have models of products in design laboratories where your engineers can spec out several passive component substitutions or alternatives if the preferred component is unavailable,” said Johnson. “In some cases, it might be a manufacturing engineer who does this. The important thing to remember is that you have a contingency of passive component substitutions when filling your orders depends on it.”
Listen to your suppliers
Suppliers can help you to identify alternatives to passive components that are in short supply. Since many companies no longer have the material science talent on board, they can reduce risk by working with trustworthy suppliers that have the knowledge and can help them solve their demand issues.
Avoid single-sourcing passive components
There are many different qualified passive components and vendors out there but companies (and engineers) can tend to focus on only one. As long as a passive component shortage looms, companies can ill afford to single-source.