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Electronic Components

How Can Companies Combat the Electronic Components Shortage?

Electronic Components Shortage?

How Can Companies Combat the Electronic Components Shortage?

Electronic components shortages show no signs of abating, fuelled by growing demand for electronics, limited availability of raw materials, soaring manufacturing prices, and lingering COVID-19 disruptions.

Shortages have hindered manufacturers since 2018, but things came to a head in 2020 with the COVID-19 pandemic disrupting supply chains.

The pandemic created an imbalance in supply chains, with demand for many components, from chips to actives and passives, outstripping supply. The question is, how can companies combat the electronic components shortage?

Partner with a distributor 

Electronic component distributors occupy a unique position in the supply chain, representing the manufacturer and customer. Distributors work for both parties to move components up and down the supply chain.

The benefit of working with a distributor is that your company will be in the mix for components not available through traditional channels.

For example, we specialize in the procurement and delivery of electronic components and parts for a wide variety of industries from the world’s leading manufacturers. We can help you beat allocation challenges and long lead times.

Diversify suppliers

Diversity is the key to strengthening your supply chain. You need multiple sources for electronic components. It’s a good idea to have retail and distribution channels, so you have several routes should one supplier channel fail.

Diversity can also be found in geography. A supplier in your home country is essential, but so are suppliers close to the manufacturing source.  

Expand storage capabilities 

If your company can expand its storage capabilities for essential components, this is the simplest way to combat shortages. By storing large quantities of components, you create a supply separate from the chain.

The risk with expanding storage is procuring more components than you need, resulting in oversupply problems that incur heavy losses.  

Source equivalent components  

When components are unavailable, you can specify equivalents that meet your performance and financial specifications. Equivalent components perform the same job as your original components, but another company makes them.

A simple example is Samsung, which uses its own Exynos chip or a QUALCOMM chip in the same smartphone model depending on where the smartphone is sold.

Visibility and proactive planning 

Supply chains are complex beasts that require visibility to manage. Monthly stock updates are no longer sufficient; to combat shortages, you need real-time supplier updates and an inventory catalog to keep track of supply.

You can proactively plan component shipments and tap into price dips and new inventory when you have visibility over total supply.

Predict obsolescence

When electronic components become obsolete, manufacturers who haven’t planned for it scramble to find components that will work. This inevitably creates bottlenecks in the supply chain as many big companies compete for orders.

Obsolescence is predictable because all electronic components have a run date, and manufacturers update lifespans with inventory cataloging. You can avoid shortages and soaring prices for rare parts by predicting obsolescence.  

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component shortage Electronic Components

Equivalents keep the supply chain moving in uncertain markets

Equivalents

In uncertain markets, the demand for specific, branded components tends to outstrip supply. We have seen this recently with the semiconductor shortage, where specific chips are hard to come by at a time when they are needed.

Equivalent components, also known as equivalents in the industry, provide an immediate solution. These ‘generic’ parts can be specified when specific parts can’t be sourced and in cases where parts no longer need to be from one brand.

Successive cycles of electronic component shortages (especially in the semiconductor sector) have led to manufacturers specifying equivalents on their order sheets. Outside of sectors that have precise specifications for safety, like aerospace and biotechnology, these equivalents are helping to keep supply chains moving.

Equivalent in quality and specification

One of the common misconceptions about equivalent components is that they are somehow castoffs or second-best components. This is untrue. They are simply equivalent components from a different brand/maker/OEM.

The term ‘equivalent’ is used to describe components that can be used as substitutes for specific components. They meet the size, power, specification and design standards set by design teams. They are ‘like-for-like’ on the spec sheet.

The quality aspect of equivalents is only a concern when the electronic component distributor cannot verify the provenance of the components. At Cyclops, we only source genuine, verifiable components. We would rather expand our supplier base than source a batch of equivalents that we cannot be sure of.

A pragmatic approach to managing supply

Companies that are fixated on using specific components run the risk of running into roadblocks. There is a global shortage for chip passives and discrete semiconductors and this problem is expected to last through 2021.

Specifying equivalents is a pragmatic approach to managing supply chains in uncertain markets for several reasons. For the customer, generic specification reduces supply chain risk. It allows the customer to meet demand requirements without the risk of backorders, supply constraints, or being outbid by other companies.

The biggest benefit is flexibility. Rather than be tied to what is in stock and what you can source from an OEM, you can specify a value and chip size for passives, or a generic diode designation, and let your distributor source equivalents.

If you want to give yourself the best chance of meeting the demand for scarce electronic components, equivalents will need to form part of your supply chain. Otherwise, you run the risk of disruption and higher procurement costs.

How we can help you

Lantek specialises in the procurement and delivery of electronic components and parts for a wide variety of industries from the world’s leading manufacturers.

We can source equivalent components for you from our global network. All we need is a value and chip size for passives or a generic diode designation for actives. We will work with your spec sheets and source high-quality, equivalent components.

If you are currently experiencing an electronic component shortage, we can help. Email us if you have any questions or call us on 1-973-579-8100 for a chat with our team.