A scenario with a strong demand for a specific type of electronic component but not enough supply to satisfy that demand is an electronic component shortage. Several things might cause this problems in the supply chain, and delays in production or delivery.
Consumer electronics, automobiles, and telecommunications are just a few businesses that the lack of electronic components and individual customers may significantly impact. As a result, price rises, product delays, and even production halts may result from scarcity. However, scarcity can also influence the creation of novel goods and technology.
Recent years have seen a particularly severe scarcity of electronic components, with geopolitical tensions and the COVID-19 pandemic adding to interruptions in the worldwide supply chain.
Why is it so hard to get electrical parts?
There are several reasons why finding electrical parts could be difficult:
Counterfeit products: You risk acquiring fake or inferior electrical parts from unreliable suppliers, which might endanger your safety, harm your equipment, or create system malfunctions.
Complex specifications: Complex requirements for electrical parts may be necessary, requiring certain sizes, materials, and performance qualities. Due to this, it could be challenging to identify acceptable substitutions or alternatives.
High demand: Due to the rise in the usage of electronic systems and gadgets in various sectors, including telecommunications, healthcare, and the automobile industry, electrical parts may be in high demand.
Supply chain disruptions: Worldwide supply chain disruptions brought on by the COVID-19 pandemic have resulted in shortages and delays in the manufacturing and delivery of various goods, including electrical parts.
Limited availability: Due to their particular function, application, or manufacturing method, certain electrical parts could only be available in restricted quantities. For instance, due to security considerations, the supply of specialized components used in aircraft or military applications may be limited.
Most impacted Sectors Affected by the Lack of Electronic Components
The supply of electronic components is greatly affected by the availability of semiconductors in many sectors. These three sectors, in particular, are affected by the shortage:
- Power/Energy: Construction, a sector that is struggling with other suppliers as well, is hampered by the shortages of electronics components, which also affect LED lighting. It may also impede the development of renewable energy.
- Smartphone/Tech: The demand for cell phones drastically decreased during the epidemic but is anticipated to rebound. Nowadays, the industry uses around half of the multilayer ceramic capacitors made annually.
- Automotive: Despite the short-term decline in demand for automobiles, the automotive sector is going through significant developments that are increasing manufacturers’ reliance on the supply of electronic components. More complicated electronic elements that adhere to safety and warranty criteria are necessary for automated systems and sensors that are more advanced. As a result, the requirement for electronic components will increase along with the growth in the market for electric cars.
Automobiles, consumer electronics, and medical gadgets are just a few of the numerous industries impacted by the global scarcity of electronic components. These are a few strategies for addressing the worldwide scarcity of electrical components:
Diversify Supply Chain
The manufacture of electronic components focuses on a few nations. Examples include such as China and Taiwan, which is one of the primary causes of the shortage. However, reducing the risk of supply chain interruptions is possible by purchasing components from many locations.
There are various ways that supply chain diversification might lessen the worldwide scarcity of electrical parts:
Encouraging Innovation: Moreover, diversification can promote supplier competition and innovation. A better and more diverse supply chain may come from companies working with various suppliers to develop new technology.
Improving Supply Chain Resilience: The robustness of the whole supply chain increases by diversifying it. Businesses might use a range of suppliers from several markets and countries to guarantee that the supply chain can sustain interruptions in one location.
Identifying Alternative Suppliers: The supply chain must be diverse. You can do this by locating and working with various vendors that can deliver the necessary electronic components. This gives businesses additional alternatives and flexibility if a particular provider cannot satisfy their demand.
Reducing Dependence on a Single Supplier: It might be dangerous to rely solely on one source for electrical components since any disturbance in their supply chain could result in a shortage. Therefore, companies may lessen their reliance on a single supplier. Additionally, they lessen the effect of interruptions by diversifying their supply chains.
In conclusion, supply chain diversification may enhance supply chain resilience, promote innovation, and lessen the effects of disruptions. It can also offer alternatives and flexibility. These advantages may eventually aid in easing the worldwide electronic component scarcity.
Increase Production Capacity
The worldwide scarcity of electronic components can significantly reduce by increasing production capacity. However, this may not be a comprehensive answer. Nevertheless, these are some ways that boosting manufacturing capacity might be beneficial:
- Promote new investments: The sector for electronic components can benefit from new investments by increasing manufacturing capacity. As a result, new technology, new industrial techniques, and more effective supply networks may result.
- Shorten lead times: The time it takes for a manufacturer to fill an order can shorten with increased manufacturing capacity. This can shorten backlogs and speed up order delivery to clients.
- Satisfy rising demand: There is a much greater need for electronic components worldwide, and raising production capacity can assist in satisfying this demand.
We may not resolve the scarcity of electronic components by simply expanding production capacity. The following are some more causes of the shortage:
- Trade tensions: Trade conflicts between nations can impact the manufacture and distribution of electronic components.
- Rise in consumer electronics demand: The epidemic has also resulted in a rise in consumer electronics demand, which has added stress to the supply chain.
- Supply chain disruptions: The COVID-19 epidemic has affected the manufacture and transportation of electronic components, disrupting the worldwide supply chain.
A multifaceted strategy is required to overcome the global scarcity of electrical components. Increasing manufacturing capacity, strengthening supply chain resilience, diversifying supply sources, and investing in R&D to create new technologies and production methods are a few examples of how to do this.
Enhance Visibility and Transparency
We can prevent shortages by improving supply chain visibility and openness. As a result, we can accomplish this by utilizing digital technologies. An example is using blockchain to build a transparent and secure supply chain network.
Several ways to increase awareness and transparency might reduce the worldwide scarcity of electrical parts:
Reduced fraud and counterfeiting: Increased openness and visibility can also aid in lowering the prevalence of fraud and counterfeiting in the electronic components sector. This can assist in guaranteeing that electronic parts are of the highest caliber and adhere to the essential requirements.
Better decision-making: Decision-makers may get more accurate and timely information due to increased visibility and openness, enabling them to make better-informed decisions. This may result in more effective resource management and increased productivity.
Improved collaboration: Improved openness and visibility can also promote more effective cooperation between suppliers, customers, and manufacturers. This may result in more effective manufacturing and distribution, lessening the current scarcity of electronic parts.
Better planning: Manufacturing companies and suppliers may better plan and predict demand if the supply chain is more transparent and visible. By doing this, avoiding backlogs and guaranteeing prompt production and delivery of electrical components will be possible.
In general, improving visibility and openness can contribute to building a supply chain that is more reliable and effective. As a result, it can help ease the worldwide scarcity of electronic components. However, it’s crucial to remember that this is only one part of a multifaceted strategy to address the deficit, which also involves boosting manufacturing capacity, diversifying the supply, and spending money on R&D.
Prioritize the Allocation of Components
Electronic components can be prioritized for use in essential goods by manufacturers. By doing this, you may ensure that items that are crucial to the economy, like medical gadgets and infrastructural equipment, have the required parts.
Numerous ways prioritizing the distribution of electrical components might address the worldwide shortage:
Encourage investment in production capacity: Allocating electronic components according to priority might also promote investment in production capacity. For example, manufacturers may be more inclined to invest in boosting their production capacity for specific components if there is evidence of high demand for them.
Reduce lead times: Lead times can reduce by allocating electrical components in order of priority. In addition, manufacturers can hasten the distribution of components to other customers by ensuring that the most crucial applications get access to them first.
Improve supply chain efficiency: Allocating electrical components according to priority can also increase supply chain effectiveness. Manufacturing companies may save waste and avoid backlogs by assigning components to clients according to demand and urgency.
Ensure critical applications have access to components: Manufacturers may guarantee that essential applications, such as defense, aerospace, and medical equipment, can access the components they require by prioritizing the allocation of electronic components. This might contribute to ensuring the security and safety of these applications.
We should prioritize the distribution of electrical components. However, this is only part of a multifaceted strategy to alleviate the shortfall. Increasing manufacturing capacity, varying the sources of supply, and making research and development investments are other alternatives. Manufacturers must also carefully allocate components following necessity and urgency rather than client size or profitability.
Invest in R&D
Research & development spending can create fresh, cutting-edge electronic components less vulnerable to supply chain interruptions. This might involve creating new materials, upgrading product design, and enhancing production procedures.
We can alleviate the worldwide scarcity of electronic components in several ways by investing in research and development (R&D):
Improving supply chain efficiency: R&D may also boost supply chain effectiveness. Companies may more accurately estimate demand, manage inventory, and optimize production schedules using advanced data analytics and machine learning approaches. This may contribute to a more consistent supply of electronic parts.
Creating new technologies: Through funding R&D, new technologies may be developed that assist in slashing the need for electrical components. For instance, creating new communication protocols with less component requirements might lower the demand for specific electrical components.
Developing new manufacturing processes: New manufacturing techniques that boost productivity and speed up the production of electronic components can also come up with R&D. As a result, producers may create more components in less time, easing the scarcity.
Finding alternative materials: Research and development efforts might concentrate on locating substitute materials that can help produce electrical components. This can lessen reliance on the present materials, which are experiencing shortages and problems with the supply chain.
In summary, by identifying other materials, devising new production techniques, developing new technologies, and enhancing supply chain effectiveness, R&D spending may contribute to resolving the world’s scarcity of electronic components. However, it is crucial to remember that R&D is a long-term plan, and it can be some time before the advantages are entirely appreciated.
Modifications to the product’s design and production methods
Manufacturing and supply chain problems could sometimes require more rapid remedies for businesses. For businesses that can’t get the chips they want, temporary chip replacement can be necessary.
One alternative is to swap out the present chips for ones with more or less memory than the current solution. However, larger processors require budget tweaks, while smaller chips might only function with updated firmware with less memory.
Designing around shortages could be the only short-term fix for some product supply difficulties. This particularly happes in sectors where relief might not come until early 2023.
The company may better prepare for emergencies by creating new designs and anticipating future shortages. Open-ended designs that are simple to modify in response to component availability may assist in maintaining manufacturing flexibility, letting the company respond swiftly if shortages make a chosen chip or component challenging.
Forming alliances with suppliers
Because of these connections and continuous contact, suppliers may give customers the most recent information on market circumstances. A head starts on part availability and maybe guidance on dealing with impending shortages.
Companies that continue to work with their suppliers will probably recover from the shortfall quickly. Several chip vendors also provide preferred customer programs and comparable efforts that provide clients preference if they agree to forge long-term commercial connections.
A firm can ensure a supply of necessary components well into the future if it can afford to lock into a six-month or longer contract.
Also, strengthening the organization’s supply chain might aid in crisis preparedness. For example, a brand may safeguard itself against potential supply chain shocks by extending storage facilities for crucial components, enhancing supplier diversity, and investing in risk management.
While attempting to handle existing shortages or diversify their supply base, organizations should avoid using grey markets and unregistered vendors. Even when they can supply chips when other manufacturers cannot, the quality and dependability of these suppliers and resellers may be poorer than those of more reputable sources. As a result, the drawbacks of dealing with grey-market suppliers may outweigh the advantages.