Management decisions threaten the entire electronics industry.
The simple chain is only as strong as its weakest link. Chains have been used for centuries to connect and secure everything from ships to anchors during a storm, large and heavy payloads onto trailers for transport, and more recently, businesses to customers and suppliers for commerce.
Chains are subject to many challenges. Rust and corrosion are the most obvious potential causes of failure for metal chains. Temperature and chemical exposure can cause failure with plastic chains, and politics, as well as epidemics, can test the strength and tenacity of the chains of commerce. And human error challenges each and every one.
Global supply chains have been created, nurtured and evolved into what could best be characterized as one of the most efficient systems ever utilized in the history of manufacturing. The global supply chain that supports our electronics industry in particular has enabled amazingly cost-effective production of high-quality materials, supplies, sub-assemblies and finished products, enabling much higher overall value. The scope of the supply chain is extensive, touching everything from raw materials to consumer products to industrial equipment, and includes not just finished products but also the spare and replacement parts necessary to keep everything functioning long after a product goes into service. This continues to take place despite the pulling, twisting, stressing and testing of each chain’s links over and over again over the past decades.
Each link of a chain can look very different. Logistics, for instance, whether local or global and despite being just a single link, has so many moving parts that any slight problem, from weather to equipment, will cause problems and delays. Despite this, logistics have not typically caused supply-chain problems or been the link that breaks the chain. Yes, logistics issues can cause an imbalance between supply and demand, but that typically affects the cost of transport rather than the ability to transport. The chain's logistics link is rarely the one that completely breaks.
The Covid-19 pandemic, of course, had a dramatic impact on the supply chain. When factories close due to worker sickness, nothing is produced. When nothing is produced, then that, in effect, breaks a link in the supply chain. Equally, when nothing is produced in one factory, it causes collateral damage to other factories which, in turn, must either cease production or make significant changes to substitute for the unavailable item to meet customer demand. Health issues such as a pandemic occur without much warning, and in the case of Covid-19, the impact lasted for years. Despite such an unexpected shock, this link in the electronics supply chain, while stressed, did not break.
Another link is tariffs. Tariffs ricocheting through the world cause a different strain on the supply chain. This dynamic causes companies to attempt to avoid selling into or buying from certain countries to avoid a tariff. The result is a misbalance of where critical materials are located versus where they are needed. This usually results in additional costs, as longer and more costly shipping routes emerge to circumnavigate tariffs, which exacerbates product availability and creates short-term shortages of some materials. The supply chain will continue to be challenged in dealing with this politically geographic-centric phenomenon, which, during short-term spurts, may cause a chain link to crack – or break.
With all the challenges that promise to stress the supply chain, a current, seemingly self-inflicted stress may be the one that provides the greatest risk of cracking the link that breaks the chain. This stress might best be called human error caused by an increasing number of company executives who have decided that spare parts and/or “local” inventories of raw materials are neither necessary or cost-effective to support individual customers or the industry at large. While on the surface this may seemingly be a minor supply chain issue, in reality the real collateral impact may well result in virtually shutting down manufacturing businesses. Spare parts to keep machinery operating or critical material inventory needed to manufacture a product to meet an order now too often takes weeks – if not months – to obtain.
In such a competitive world where all links of the supply chain are being pulled, twisted and strained, self-inflicted errors must be avoided at all costs. And some of those costs may be the expense of ensuring adequate inventory is available. Spare parts to keep capital equipment reliably operating and critical materials required to produce technology-rich products all need to be available close to the customer, not just the location where they were manufactured.
A supply chain where any link of the chain breaks will most assuredly cause companies, industries and economies to founder from a lack of needed materials, supplies, parts and components for the products consumers and industry rely upon. With all the seemingly uncontrollable challenges a supply chain must endure, businesses need to avoid creating additional problems that will most assuredly harm their brand and customers, as well as the entire supply chain.
Peter Bigelow is president of FTG Circuits Haverhill; (imipcb.com); This email address is being protected from spambots. You need JavaScript enabled to view it.. His column appears monthly.
