3 Ways to Manage the Global Electronic Component Crisis

Desperate times often call for desperate measures, like the ongoing electronic component crisis, especially the chip shortage.

An industrial conglomerate reportedly bought washing machines for the semiconductors inside to use them in its own chip modules.

The desperation perhaps stems from the fact that there is no relief in sight from the situation anytime soon. Intel CEO Pat Gelsinger recently said that the chip crisis might drag on till 2024 because of equipment shortage. There are also not enough chips for the machines that make chips, extending the lead times.

The shortage is driving up prices of electronic components. They rose by 15-20% This year, the rate of increase could slow down to 10%-15%, according to GEP’s price benchmark analysis. But the prices of individual parts may double, depending upon whether the buying channel is a distributor or an original equipment manufacturer (OEM).

Businesses would need to anticipate electronic components shortage in the coming years and take preventive, proactive steps now to mitigate disruptions and drive value even when the times are harsh.

1. Get experts on-board

If your organization doesn't have established supply channels, strong supplier relationships and lacks in-house expertise, it is crucial for you to leverage external procurement knowledge and experience. This will help prevent supply bottlenecks in the uncertain times.

With external expertise, you will be able to:

• Monitor market trends and price fluctuations
• Establish a comprehensive overview of their supplier landscape and capabilities
• Devise inventory and collaboration plans followed by cost savings and more value.

Also, even if you have a nominal direct spend on electrical components, this holds true.

Also read: Will The Chip Shortage Ever End? Strategies For How To Manage It

2. Data-driven supply chain analysis

Leverage data to make short- to mid-term analyses to mitigate risks and prevent future disruption. Your analysis should include:

• Identifying the key drivers for the shortage of the specific parts needed
• Reviewing the measures taken by policymakers and major players
• Examining the time OEMs require to set up new manufacturing sites

3. Measures to future-proof supply chain

Prevent large-scale disruptions to production, order fulfillment and the company's revenue and reputation by:

• Collaborating with major suppliers in real-time to gain greater visibility into supply and demand, their processes and timelines to make accurate forecasts and inventory plans.
• Sharing long-term forecasts with suppliers and place orders months in advance to secure supplies.
• Deepening partnerships with existing key suppliers and establishing business relationships with OEMs will help navigate the future with fewer hiccups.

Learn more about the how to manage electronic components shortages in our bulletin: How Enterprises Can Combat the Global Chip Shortage