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What are the Major Foundational Areas and Challenges of Supply Chain Management in Electronics Industry?

As the manufacturing companies of today face serious global competition, they now seriously seek innovative strategies to help them stand out. This is why supply chain management is important, because it is one of the important strategies. A supply chain system that is properly designed helps in improving product quality, boost efficiency, and enhance customer satisfaction.

What is Supply Chain Management?

The traditional acquisition of commercial innovations in processes and services were first achieved by companies with vertical integration. Later, this global competitive industry took on a vertical integration structure that permitted interaction between manufacturers, suppliers, and clients.

Furthermore, supply chain management has to do with an interconnected network of corporations in either service delivery on product manufacturing. Also, supply chain also serves the distribution logistics and manufacturing chains. Manufacturing logistics chain deals with the business processes that are linked onto production. The distribution logistics chain on the other hand deals with the after-sales and involved operations, which includes the maintenance and repair of products.

As a result of global economies from globalization, there is now more attention on the supply chain. You can refer to manufacturing as an activity offering more value to a specific material. Due to the fact that each step plays an important role in the process, let us consider the main the major foundational areas of supply chain management in electronics manufacturing process.

Major foundational areas of supply chain management

Supply Chain

This supply chain is regarded as an integrated system, which enables members of organizations to help in addressing and collaborating the concerns of material and information flow. This integration model was created to analyze multi-product complexities, check out and address different planning strategies to provide answers to multi-period problems and issues, as well as capture whatever technology has been used. This integration model helps in integrating sourcing decisions, production, and distribution.

Here, information usually flows upstream, in contrast to materials that flow downstream. This means information travels down from customers, to logistics, suppliers, and manufacturers. Later, the supply chain will come into the picture streamlining the communication and also causing its simultaneous flow. This allows electronic manufacturing process activities to achieve coordination both upstream and downstream.

Transportation

How transportation techniques progresses defines the services’ efficiency. Management principles that are well-devised help in enhancing operation costs for delivery speed, energy-saving, quality of service, and moving load. Due to nationalism and globalization in the last decades, logistics management has now become critical and important to quick and on-time delivery.

With logistics, you will be able to optimize the existing manufacturing processes as well as distribution when promoting the efficiency and competitiveness of a specific company. The transportation system is one very important element. A robust system is made of a good transport implementation and clear logistics for continuous supply chain operations.

Warehousing

This is a very important aspect in supply chain. As of today, there are obvious changes in supply chain, technology, and environmental sustainability. All these affect warehousing. This is also called distribution centers and warehouses do not really add value to supply chain of products that are bought in bulk or large quantities.

Also, they can be more efficient compared to the other products. This efficiency comes in when the products you have designed to be shipped are consolidated. This cuts transportation costs. It also completes other different value-added tasks, which include branding, packaging, labeling, etc.

Sourcing

The huge competition in the industry as well as how raw materials have fluctuated has led to the increase in the need for better management of suppliers. There is more emphasis on managing suppliers offering materials that are required to satisfy a customer demand.

Teams involved in procurement and sourcing are usually focused on balancing both the external and internal demands of the customers. Also, it considers the role of supply distribution and technological change.

Returns Management

This is a process whereby activities that are linked to reverse logistics, gatekeeping, and returns are managed in the organization. When you implement properly, you allow the administration to take charge of the reverse flow of the product efficiency, as well as reduce or lessen unwanted returns.

Note that failure to consider the reverse flow can lead to some missed opportunities. This means that effective management of returns could affect your finances’ performance positively. It will also assist you in building a stronger relationship with your customers.

Post sales services

These have some strategic relevance with a firm. They have the potential ability to boost customer retention, product development, and profitability. Consumers purchase products when there is a need to find answers to some problems.

 Sadly, majority of managers fail to realize that products that are electronically manufactured and purchased should service the customers or end users. Supply chain management is majorly concerned with the managing reflows. The post-sales service works with different supply chain managers present in operational, relationship management, IT, finance, and forecasting processes.

Collaboration and Partnerships

Collaboration and partnership is the major force involved in supply chain management. Though, all these are not completely leveraged, there is a need for companies to realize that these supply chain partners seek to form a partnership to ensure mutual benefits.

Partnerships and collaboration makes the difference between long –term sustainability and profitability and short-run dissolution. The benefits here have surpassed efficiency and effectiveness to enable companies to help meet customer demands, increase market share, and grow markets.

The seven foundational aspects of supply chain management should assist different companies in handling the realities of the next huge opportunity, coupled with meeting customer needs. The goal has to be to have customer loyalty, maintain quality, and increase efficiency.

What are the Challenges of Electronics Supply Chain Management?

Back in 2019 and before then, the discussion relating to the supply chain usually revolved around counterfeiting, component shortage, and electronic products lifecycles. Due to COVID-19 as well as the second wave sweeping the world, these issues seem easy when compared to widespread shortages, factory closures, as well as all-around uncertainty. Though there has been a shift in attention, the earlier challenges of supply chain will have to be checked after our modern life returns to normal.

Major Challenges in Electronics Supply Chain Management

The landscape for electronics sourcing was in chaos and it is likely to continue like this. Global supply chain was specifically designed for buyers to detect the ideal trade-off between minimum lead time and the lowest price possible. This means that buyers might tolerate higher prices if electronics suppliers can meet the production schedule. Also, this involves electronics manufacturing in higher volume. Therefore, customers might accept a longer lead time.

Buyers have the free will to choose their sources. Therefore, they can take advantage of the logistics system despite tariffs and shortages. There are some challenges in the electronics supply chain management. EMS companies are trying all means to overcome these challenges.  Below are some of the challenges faced in the electronics industry:

  • Shortages are still a major problem for fundamental parts designed with legacy technologies.
  • The electronics industry performed well compared to some industries
  • Electronic buyers now focus on the possibility of new shutdown and restricted activity
  • There was erratic demand in the component industry and this resulted in erratic supply. However, the industry was experiencing growth.
  • OEMs and EMS companies now experience shortages and long component lead time.

All of these challenges will result in three crucial electronics supply chain management problems faced by the electronics industry:

Shorter product lifecycles

Shorter product lifecycles are a result of more rapid development in technology. Also, changes in consumer behavior contributed to this problem. Therefore, these create inventory management problems. Also, companies now need extra inventory to meet the demands of customers. Companies have to turnover inventory more. Therefore, this increases the risks and cost of carrying inventory, especially if a product experience failure.

Also, depending on a centralized manufacturing base makes it hard for companies to get the components they require. This is more difficult when there are global supply chain disruptions.

Lack of diversity

There are several primary and secondary electronics distributors across the world. Some of these distributors have maintained relationships with major component producers. However, they are fewer major electronics manufacturers for components. This lack of production diversity has become obvious due to geopolitical chaos in the form of tariffs.

Also, the just-in-time supply chain model depends on predictability. This model has been so slow to adjust to sudden shocks.

Product complexity and commoditization

This explains the reason behind shorter product lifecycles. Shorter product lifecycles exist because each portion of the design chain and supply chain is now commoditized. Therefore, companies keep introducing more complex and newer electronic devices just to remain competitive. While, this is good for the end customer consumer, it isn’t beneficial to electronics companies. This may drive competition and reduce prices for consumers. Also, it helps consumer to enjoy all the features in the products.

However, this situation has made OEMs to outsource almost everything except the IP. This will only remain that way as long as there are regulations that don’t prevent this. Also, this factor has contributed to China’s rise as a manufacturing center in Asia.

There are several ways to address all these challenges. One of such ways is to minimize the risk and diversify electronics supply chain in Asia. Also, the electronic supply chain industry should focus on other countries in Asia.

More Diversified Supply Chains

Globalization has impacted the world in several ways. It is great for consumers in advanced countries. Also, it has increased wages and improved livelihood in poorer countries. However, we still need to address the ethical questions around environmental damages and working conditions. Also, differences in labor cost in China and other countries are beginning to close.

The current global chaos is now forcing EMS and OEMs companies to have a rethink on the competitive advantage of wage differential. There is an increased risk with lower labor costs. This can be unacceptable for crucial components.

Furthermore, the gradual increase of labor costs made the industry to have a rethink using China as the manufacturing powerhouse in the world. The discussion focused on developing regional production and distribution centers. This will help eliminate China as the only source for several components and cheap assembly services.

However, people might not see this effort as being worth the capital and time investments since no one like to remember Black Swan events. Also, the whole network of distributors is still in Chinese hubs. The failure of just-in-time logistics has created motivation for the regionalization of production and distribution capacity.

 OEMs and system integrators can diversify their supply chain away from Asia and make supply chain closer to home. There will be some benefits if electronics manufacturing services man can achieve this.

Benefits of Diversifying Supply Chains

With china’s existing supply of consumer electronics and other electronics products, the supply chain visibility is low. There is a need for new markets. Diversifying supply chains will help to meet more consumer needs.

Traceability

There are fewer opportunities for any form of counterfeiting if components get to fewer hands. Also, this makes raw materials and components much easier to trace in the electronics industry.

Less risk

More sources result in less risk. Spreading production capacity across a broad geographic region will minimize the risk of regional disruptions like tariffs. Also, this offers a competitive advantage for consumer products.

Easier to protect IP

This will reduce any risk of IP theft when different parts of a new product’s assembly are widely spread to various regions. Also, IP theft may be easier to trace if there is more localized supply.

Conclusion

The United States is moving in this direction. Some years back, there was less focus on onshoring. The Trump administration began to push an initiative to onshore industrial supply chains. Therefore, this will reduce the dependence on China.

When high demand results in limited available production capacity for a particular product, it is crucial to create priorities. However, we might likely see how the proposed trace policies by Biden’s administration will impact dynamic onshoring. Also, the EU is trying to achieve this same goal, especially for the pharmaceutical industry.

This is a complex challenge that is worth undertaking. With the shifting manufacturing capacity and disruptions in the supply chain, there has to be breakthrough. Presently, Southeast Asia still remains the manufacturing Hub. However, with new implementations taken into place, change can take place.