Teams are overworked and on the edge. How to combat the slide.

One of my favorite bosses pointed out that a contract is only as good as the intent of the parties who sign it. Yes, you can haul a party in breach of contract into court or arbitration, but the resolution rarely completely fixes the issue, and in many cases parties breach agreements with no consequences. Nowhere is that more evident than in today’s semiconductor industry. You’ll get parts when they arrive even when there was a commitment for an earlier date; they may cost more than the agreed-upon price; and the order is noncancellable regardless of how many previously agreed-upon terms change. In short, one party has no intent to adhere to the terms of its agreements, and market conditions will likely enable that behavior to continue indefinitely with no consequences.

This type of environment can be as contagious as the most recent Covid variant. Customer service and honoring commitments are sliding across the board. Last month, I listened to a gate agent lecture a 6 a.m. flyer who foolishly thought she could get to her destination in a single day, saying the airline wasn’t obligated to put her on a different airline until she had been stuck in transit for 48 hours. Separately, three contractors I called for glass cutting informed me that they couldn’t commit to a time for quoting or delivery but would a call an hour before they arrived. One finally did call back a week later and got the job. The other two still haven’t called back. When all competitors in a market are getting away with behaving badly, mediocrity thrives.

Strategic conversations are key to sustaining existing business.

The current business environment is creating two significant challenges for mid-tier electronics manufacturing services companies at a strategic planning level. The first is program management workload. Material exceptions have become the norm, and program teams have become highly reactive to respond to changing program variables. Second, material constraints are causing OEMs to keep projects at their current suppliers and push out launch plans on new products. Taken together, planning for account growth beyond what is automatically going in the pipeline based on spikes in existing demand may not be a great use of program management time.

While it is unlikely a significant number of projects will be awarded in the short term, a lot of dynamics in the background make strategically assessing larger accounts an important activity right now. These include: