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After living through more than two years of the pandemic, we are very aware of the issues facing the electronics industry. We have witnessed months of factory shutdowns, labor disruptions due to a reduced workforce, and country, regional, and citywide COVID regulations and shutdowns. I will describe some of the issues we’ve been facing, and then explain how we learned to be creative and look for the silver linings in these disruptions.
Unlike past periods of extreme allocations, we now have delivery commitments that cannot be trusted, making it very difficult to plan and meet our business commitments. For example, due to ongoing material availability fluctuations, “committed” purchase order delivery dates are moving targets; changes are happening real-time, and materials that you expected to be delivered by the committed date are now weeks or even months out. This leaves both us and our customers with stranded inventory, waiting for a few parts before we can start, complete, and ship a job from our factory.
Conversely, we have seen the opposite happen: We were given a commit date two years out and even after the customer assisted in discussions with the manufacturer, we were faced with placing a premium priced NCNR order with an independent distributor only to have the manufacturer come back weeks later and give us the “great news” that the parts will be shipping in 30 days.
We are seeing price increases not only at the time of PO placement, but up to and including the actual ship date as the materials are ready to ship. How do you explain this sudden change in plans to management, your board of directors, and/or your shareholders? In the past, when you received a committed date or price, you may not have liked it, but you knew that you could count on it. Those days feel like they are long gone—at least for now.
It feels like the perfect storm with this global event taking place; not just a regional or manufacturer specific event, but the added burden of other dependencies such as logistics, downstream suppliers, raw materials, outside processes, and more, that impacts our daily lives.
With many of our customers in mil/aero we add “degrees of difficulty” to our supply chain processes. Because so many of our customers cannot provide forecasts for various reasons, we struggle with being able to pass forecasts along to our suppliers. The positive news is that some of our customers now understand the situation due to their own experiences in the supply chain. They are now providing POs to us out into 2024. While we have manufacturers/suppliers requesting our 2024 forecasts/orders now they will not support us, there are still suppliers who will not accept orders for delivery in 2024 due to the unknowns about the future. They are not willing to commit.
To read this entire article, which appeared in the September 2022 issue of SMT007 Magazine, click here.