Amidst doom and gloom predictions of global economic fallout from COVID-19 and further human and social ramifications, the electronics industry is quietly confident that demand for products will not stall this year or shortly.
This makes for a morale-boosting headline, but underneath the battle lines, there is a trade war raging as a result of a divided supply chain.
Equipment manufacturers are struggling to get a hold of components and component manufacturers are struggling to make enough new components. This, the result of a virus that has thrown the world into unchartered territory and forced elected leaders into making profound decisions that have affected our way of life.
The electronics sector is healthy for now, but keeping it going has required change and intelligent thinking. This is how the electronic supply chain has been divided by COVID-19:
The battle for stock
With the production capacity for electronic components down as a result of COVID-19, it is no surprise that the components’ supply chain has been impacted. Fewer components are being made, creating a shortage of stock.
As a result of this, we are now seeing a shift in behavior from manufacturers, who are component hoarding and paying over-the-odds for stock to meet demand. This has reduced the number of components available on the open market, creating a shortage, and the issue is compounded by a lack of new production.
Supply moving away from China
As a result of the coronavirus in China, which has devastated the workforce and adversely impacted the country’s social reputation, manufacturers are beginning to seek alternatives to meet the demand for electronic components.
Taiwan, South Korea, Singapore, Malaysia, the United States, Japan, Vietnam, the Philippines, and Germany are all rich manufacturers of electronic components. We are now seeing greater diversification in supply chains. This is good news for the global economy, but not so much for China and Hong Kong.
Changes in supply chain planning
COVID-19 has forced manufacturers to pivot their supply chains to boost efficiency. From being more flexible with transportation to estimating capacity and accelerating production, manufacturers are doubling up on decision-making processes.
The optimization of production and distribution capacity are key areas, so that production can continue to meet demand while managing health. Available inventory has now become a more important factor than ever too – no longer can manufacturers rely on a steady supply of components. Orders must be planned.
Closer partnerships with electronic component distributors
Pre COVID, manufacturers typically kept the procurement of electronic components in-house with a slick and efficient operation. Inventory would be automatically updated with component orders placed electronically between supplier and manufacturer.
If COVID has taught manufacturers one thing, however, it is that you can never rely on one single supplier to deliver. One failure breaks the system.
This has led manufacturers to partner with component distributors who can deliver the stock they need. The sourcing of components is being increasingly outsourced, which brings some inefficiencies, but is necessary to keep things ticking over.