High-quality, highly reliable electronic products are realized through many devices and services coming together consistently and efficiently. One item is components; the individual parts that, together, comprise a bill of materials (BOM). Ideally, a BOM would be frozen once the engineering and purchasing departments have agreed on the parts and suppliers, respectively, needed to build the product.
Under optimal operating conditions the right parts would always be available and ready at the start of a production run. But we all know that we do not live under optimal conditions -- evidenced by the current dearth of semiconductors. The pandemic has put significant kinks in the semiconductor supply chain and it is expected to take at least 12 months to work them out. Manufacturers that, in the past, have always enjoyed unfettered access to semiconductor manufacturing capacity are now facing unwelcome long lead times. Their customers are looking at even longer lead times.
The impact of this ongoing shortage is that some manufacturers are changing their product offerings to get around the problem. If one missing component can stop an entire production line, then perhaps removing the need for that component can get it running again. What this looks like to the end customer may be the withdrawal of certain features. Car manufacturers are reportedly removing some options from their product list and giving customers money back or money off just so they can deliver a new car.
While the automotive industry has been publicly affected by the semiconductor shortage no sector is immune. Manufacturers in other verticals will undoubtedly be looking at their product features and strategizing about how to work around component shortages. For some, this may not be an option. For products that rely on storage, for example, it would be difficult to reduce the storage capacity, speed or lifetime without impacting more than just the selling price. Reputations are built and lost on the ability to meet customer demand.
This may lead manufacturers toward making component substitutions. This is where the idea of a frozen BOM really comes under pressure. The challenge here is: Will an unqualified part really be equivalent? If you can find the part you need from an untested vendor, will you be able to qualify the supplier without entering into a long-term agreement? When the supply chain comes under this kind of pressure, the benefits of just-in-time (JIT) manufacturing start to erode.
Searching outside of the approved supplier list is fraught with risk. That is why manufacturers maintain an approved vendor list, after all. When searching, purchasing professionals will know that they may encounter parts that are not new but rather unused or unwanted. The age and quality of these parts may be difficult to quantify. They may not even be genuine. The cost of putting every single component through a quality assurance process may be prohibitively expensive, despite it being the responsible approach.
Even those manufacturers that are on the approved list may be faced with difficult decisions. They may feel that it is ok to make “small” changes to the way they manufacture their products, so long as they still meet their own quality standards. The crucial consideration here is that they communicate those decisions to their customers. That customer could be you, so you need to know that the parts you are buying are not necessarily the same parts you specified. If the changes made have any impact, at any level, on the quality, reliability or longevity of the product, that needs to be disclosed. The impact may even be unknown by the supplier, in which case disclosing any changes becomes even more important.
In any supply chain, maintaining an open dialogue is critical. This is no more apparent than under the current market conditions. OEMs may be forced to extend their list of suppliers in order to overcome the mid-term shortages. Right now, JIT is perhaps a luxury we can’t afford. Many manufacturers are considering reintroducing higher stock levels, so they can guarantee continuity of supply.
Despite the disruption caused by the pandemic, the basic principles of supply chain management persist. The value of a supplier partnership is “non-fungible,” to use the current nomenclature. It must be nurtured, cared for. Presently, it may be necessary to achieve this in virtually no elapsed time, which is just another challenge that we all now face.
But the benefit of developing those relationships is tangible, particularly if it results in access to the components you need. Both sides of the relationship need to be open and willing to give and receive trust. Right now, that means being completely honest about the goods and services being delivered.
For established relationships, this openness should already be present. If it isn’t, ask why. There is always some flexibility in a bill of materials. The key is not letting that flexibility lead to fractures or breakages.