Electronics companies have had to adapt to a series of unprecedented supply chain disruptions during the past two years. As a result of these pressures, IHS Markit’s manufacturing experts have adjusted its 2022 global economic growth forecast downward. “The longer the pandemic keeps affecting supply chains, the weaker the growth outlook. Back in mid-2021 we were forecasting 4.5 percent global GDP growth for 2022. That’s now down to 4.2 percent, largely because inflation has become more pervasive than anticipated,” wrote Chris Williamson, chief business economist, IHS Markit.
Experts have advised electronics users to be more proactive in their supply chain engagement. “The tricky thing about modern supply chain management is that you can’t wait until you have a problem to begin trying to solve it,” said David Paulson, global vice president, Avnet Velocity and Avnet United. “Once the dominos start falling, it is really difficult to stop the momentum or change direction.”
Paulson recently shared four strategic supply chain tips with Bruce Rayner, principal of Locust Content and a contributor to EPSNews:
- Be more intentional about balancing near-term needs with longer-term planning and strategic positioning
Most companies have spent the better part of the past two years maneuvering to keep production lines running. Now, it is time to focus on making their supply chains more adaptive, which means reevaluating some of their foundational methodologies and strategic principles. For example, in the drive to build the leanest, lowest-cost supply chains possible, some companies underestimated the influence their supply chain has on the execution and overall success of their business continuity planning.
Now, after feeling the sting of being too lean, they recognize how agility and resiliency tie to the total cost of ownership and risk. We cannot continue to have situations where a $3.50 microcontroller is holding up the production of a $50,000 automobile or $300 million satellite. Collaborative, joint S&OP planning across stakeholders involved in each engagement is key to achieving the visibility and transparency of data needed to mitigate these risks.
- Digital is a critical driver of supply chain differentiation
To manage the possible disruptions that we may encounter in 2022, organizations need a rock-solid digital infrastructure. Using sophisticated data mining and analytics tools, supply chain organizations can create actionable intelligence from the scores of data generated both internally and amassed from external sources.
While digital supply chain tools and technologies are evolving rapidly, optimizing these implementations can be challenging for even the most sophisticated enterprises. There is often a gap between the priorities and procedures of the corporate IT group (e.g., efficiency, reliability, security) and the needs of supply chain teams to innovate and scale digital solutions quickly and cost-effectively. This can spur the formation of “shadow IT” groups that may circumvent corporate IT protocols to develop and implement solutions that fulfill customer demands. Though well-intentioned, these groups may inadvertently introduce inefficiency and risk into the IT infrastructure.
Bridging this divide with a sanctioned digital supply chain team working closely with corporate IT will position your organization to securely and cost-effectively leverage available process automation (ML/AI/RPA) to their fullest capacity and bolster advanced analytics and data-driven decision-making capabilities.
- Bridge the ideological divide between supply chain and finance
Trust, collaboration and communication – not only with external supply chain partners, but with internal corporate stakeholders as well – are critical elements of a resilient, differentiated supply chain. In particular, tighter integration between supply chain operations and finance are essential to achieving supply chain resilience, but too often the KPIs and priorities between these internal functional groups are misaligned. Finance teams will view resilience strategies such as building inventory buffers or adding freight capacity as too costly, while supply chain/operations leaders see measures recommended for greater cost efficiency as too risky.
These competing priorities can hamper a company’s ability to react to disruptions, limit options and alternative courses of action and ultimately compromise an organization’s ability to deliver value for its customers, shareholders and extended stakeholders. Conversely, when finance and supply chain work together as business partners, enterprises are better positioned to plan and implement strategies that lower exposure to disruptive risks without introducing cost inefficiencies that sacrifice financial performance.
Collaboration and communication between finance and supply chain teams may prove especially crucial in the coming year if we see a precipitous drop in end demand, leaving inbound and outbound channels stuffed with both raw materials and finished goods inventories. As a result, organizations will need exceptional inventory agility, requiring highly strategic and flexible finance models.
- Leverage design and supply chain integration as a competitive force multiplier
The past two years should have made it abundantly clear to OEM engineering teams that their work and the ultimate success of a product is inextricably linked to supply chain. Engineers can spend weeks or months spec’ing elements of a new product design, but at this point the product is all potential. Whether it ultimately sets new standards for performance, price, customer experience, market penetration and revenue generation or is beset with cost overruns, missed time-to-market windows and disappointing returns is now largely dependent on the design and execution of the supply chain.
If concerns that 2021 shortages could rebound and create oversupply conditions in the future are realized, OEMs are going to need to be very strategic about how they approach new product design. Those enterprises that actively work to break down the silos and encourage more collaboration between design and supply chain teams will be better positioned to intentionally design in components already in the pipeline or backing up in warehouses, saving themselves a lot of time and expense.
Avnet United and Avnet Velocity are two distinct, but complementary, teams supporting the supply chain requirements of Avnet’s largest global customers. Avnet United serves as a single point of contact for Avnet’s global OEM and EMS accounts; Avnet Velocity architects, delivers and operates tailored supply chain solutions for these global customers as well as other tech industry stakeholders.