“Digitization” is, like “resilience,” the new mantra for the supply chain. Digital applications range from automated paperwork to complex networks that provide end-to-end visibility of global supply and manufacturing operations. Digitized systems work across geographies and products to provide real-time data on inventory, delays, disruptions and resolutions to manufacturing sites and supply-chain partners.
Interconnected supply chains mitigate the impact of flawed forecasting, upstream supply shocks, inventory imbalance and delayed crisis response. Component suppliers and distributors that digitally interact with customers have a competitive advantage in the marketplace, according to supply chain intelligence firm Supplyframe.
Yet less than half – 40 percent – of organizations Supplyframe surveyed launched a digital customer experience or e-commerce initiative within the last year. More than a third of companies – 36 percent -- did not launch any major digital customer engagement initiatives in the same timeframe.
The Covid-19 pandemic – considered the biggest shock to the supply chain in recent history -- both delayed and accelerated digitization. Supplyframe found one-third of the businesses surveyed delayed initiatives due to Covid-19. Other companies were galvanized by the disruption which exposed shortcomings in current supply chain operations.
According to Gartner, 57 percent of manufacturing leaders say that their organization lacks skilled workers to support digitization plans.
“This research illustrates that the global electronics industry is still in an early stage of digital customer engagement maturity,” said Steve Flagg, founder and CEO of Supplyframe. “The good news is that there is plenty of room for growth. Semiconductor and electronics components companies that optimize digital channels and move at the customer’s pace have much to gain.”
Consumerization as a digital driver
The consumerization of the electronics supply chain emphasizes the need for visibility, said Richard Barnett, chief marketing officer for Supplyframe. Engineering and procurement professionals make buying decisions the same way as consumers: They do their own online research, reaching out to suppliers only after they have made their selections.
Yet fewer than a fourth (23 percent) of Supplyframe respondents said they can identify and engage with newly active design cycles. Of the active cycles they can track, 44 percent of respondents said that they have a limited ability to influence their customers’ journey.
The research suggests that companies may lack visibility into customer design cycles – and, thus, influence in customer purchasing decisions – due to data management challenges.
Most (56 percent) survey respondents indicated that they apply relatively immature customer-insight management techniques based on hard-to-access data and simple segmentation. More than a third (38 percent) said that they segment customer data based on historical purchase patterns and demographic data, and 18 percent said that customer data is often siloed or difficult to integrate.
Meanwhile, fewer than a fifth (18 percent) said that they use modern marketing technology solutions that incorporate robust marketing automation (10 percent) or real-time analytics (8 percent).
Multiple roads to digital
Digitization in the electronics industry has been evolving but not with a sense of urgency. Businesses have been reluctant to invest in platforms that provide all the necessary elements for end-to-end visibility and crisis response. “The digital transformation is at a crossroads – and the biggest structural impediment is lack of investment,” said Supplyframe’s Barnett.
There are various avenues to digitization. Distributor Sourceability, for example, has developed a digital, global e-commerce marketplace. Its Sourcengine platform provides component, inventory and price data – as do most distribution sites – along with market intelligence to inform the purchases that it enables directly on the platform.
“We understand the complex world of distribution which now includes trade restrictions and products that are tariffed or subject to duties,” said Yashar Shahabi, senior vice president of digital solutions at Sourcengine. “We customize our marketplace to the persona of the customer that’s buying from us.”
For example, engineers may design a product using components that can’t reliably be sourced. Sourcengine informs users whether a device is multisourced; has a high risk of obsolescence; or varies in price across geographies. “Engineers may develop a bill-of-material but not check the ‘health’ of the BOM,” Shahabi said. “Are parts checked for obsolescence? Can procurement actually buy a device?”
New products, he explained, aren’t automatically – or abundantly -- available. They may not meet customers’ price points. In general, procurement departments check for compliance issues and monitor component lead times. As semiconductors become more scarce lead time data is critical to manufacturing plans.
“We are providing a tool so participants don’t have to develop their own systems,” Shahabi said.
Transaction vs. strategy
A significant 42 percent of Supplyframe respondents reported having made changes to their sales organization to support remote selling/inside sales. Even more (48 percent) said they are leveraging multiple digital channels to engage with their target markets. However, just 8 percent of the survey respondents indicated that they are employing advanced self-service commerce capabilities.
“Customer expectations and buyer behaviors in the electronics supply chain have changed,” said Flagg. “Semiconductor and electronics component suppliers need to adapt to this change by optimizing their digital channels to engage with – and influence – engineers at the right times, with the right information and online resources.”
This includes 2D and 3D models or reference designs, he added; expanding intelligent, self-service opportunities for potential buyers; delivering seamless cross-channel experiences; and finding ways to leverage the digital footprints that customers leave on their web properties or with their distribution partners to inform sales initiatives.
In the broader sense, digitization can address historic problems such as imprecise forecasting, double-ordering, inventory excess/shortages and component time-to-market. The current chip shortage was driven by OEMs that misread demand; lean inventory practices; heavy dependence on foundries and long semiconductor production cycles. Business consultancy McKinsey advises redundancy in supplier and transportation networks and holding more inventory. Designers can reduce product complexity so projects can be easily transferred across manufacturing sites.
“Manufacturers are currently going through a difficult phase in their digitization journey toward smart manufacturing,” said Gartner Supply Chain Vice President Analyst, Simon Jacobson, in a statement. “They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must.”
Connected factory workers, Jacobson said, leverage various digital tools and data management techniques to improve and integrate their interactions with both physical and virtual surroundings while improving decision accuracy, proliferating knowledge and lessening variability.
Preparing for future disruptions has a present-day cost, McKinsey noted. But those investments can pay off over time -- not only minimizing losses but also improving digital capabilities, boosting productivity and strengthening industry ecosystems.
Editor’s note: Supplyframe’s research was based on a March 2021 survey of marketing and sales leaders from 180 global electronics suppliers and distributors, 84 percent of whom work at companies with more than $100 million in revenue. Conceptial Inc. conducted the survey on behalf of Supplyframe.
Gartner’s survey was conducted online between October and December 2020. In total, 439 respondents were interviewed across North America, Western Europe, and APAC.