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Duane Benson of Screaming Circuits speaks with Nolan Johnson about issues assemblers encounter with BOMs and part shortages. Duane gives advice on how to avoid some common pitfalls.
Nolan Johnson: Duane, in early 2020, we were covering some short-term supply chain issues and parts procurement challenges in the magazines. Just as that seemed to wrap up, we had the disruptions of the COVID pandemic, and the supply chain issues associated with that. Now, even with semiconductor companies putting out more product, the demand is even higher. Companies are putting tens of billions of dollars into building out new production, and word is we’re looking at parts availability challenges at least two years out.
Additionally, there’s all the “regular stuff” like having key components on your production boards go end-of-life so that you need to look at replacements to keep moving things forward. How does a design team cope? How does a design team work well with their assembler to have that communication, and that give and take through the process?
Duane Benson: Communication really is the key. The challenge is very similar to what we saw in 2018, although I think this may even be more extreme. In 2018, things would change on a moment-by-moment basis. If we learned anything from that, it’s the ability to adapt to change.
Let’s just start with putting together a prototype. As you build it out, you’re spec’ing components, filling out your bill of material, and then you build the prototype. You send in your bill of material and your design files for a quote, and you find out that of the 75 parts on your bill of material, 25 of them don’t exist, and another 10 or 15 of them are on a 24-month lead time.
Fortunately, a good portion of the unavailable components have alternates. You just have to act and communicate quickly. First, before you send the bill of material in, you double-check. Don’t assume that something that was in stock a month ago, or even a couple of weeks ago, is still in stock. For passive components, you should find alternates ahead of time. Someone will send us a bill of material, the component is out of stock, they send us an alternate, we double-check on that, get an approval to purchase it, go back to the vendor and it’s out of stock. This happened in 2018, and we see the cycle again this year. It can happen two or three times in a row—if we have to go back and forth repeatedly, each cycle has us requoting it, getting approval, ordering it, and a potential for that part to go out of stock. Whoever you’re working with as an assembler, get some alternatives ready so that you can stop that cycle.
Also, be on top of your communication. If an engineer sends us a design on Thursday, we send it back on Friday and tell them, “These parts are out of stock. Can you give us some alternates?” Then they send us some alternates. By Friday afternoon, we can quote, determine they’re in stock and order right then. But when they don’t get back to us with approval until Monday, those parts could be out of stock already. So, be willing and able to communicate at a moment’s notice.
Johnson: There’s this dynamic that feels like you’re dealing with agricultural futures pricing—pork bellies or something.
Benson: Some brokers are buying out popular inventory; things that would have cost 30 cents, now they’re saying, “You can buy a hundred of them for five bucks each.” They’re playing that game. And then they’re bidding them: “Oh, you’ll pay five bucks? That other assembly house or that other manufacturer, they’ll give me $6.50 for them. How desperate are you?” Speculation, I think, has become an unwelcome part of the economy, whether we like it or not. Demand-based pricing has its place, but when it’s minute by minute and it becomes exploitation, that’s not good capitalism.
To read this entire conversation, which appeared in the September 2021 issue of SMT007 Magazine, click here.