Shortages. For OEMs and EMS companies, few words can impart more angst and uncertainty. Electronic component shortages can virtually stop production lines, resulting in substantial loss of productivity and revenue. So what can manufacturers do to keep production (and profits) on track when the supply chain is unexpectedly disrupted? To learn more about supply chain disruptions, we discussed this topic in a Q&A with Scot Hennessey, Director of Sales for the Americas at Converge.
Q: What is the main cause of supply chain disruptions?
A: Supply chain disruptions can be caused by two different dynamics, one being demand-based and the other being supply-based. On the demand-based side, it could be due to new technology that instantly becomes popular, inaccurate forecasts, or seasonal demands. A supply-based shortage is typically due to raw material shortages or capacity restraints. Another prime cause is natural disasters, such as the flooding experienced in Thailand and the earthquake and tsunami in Japan, for example. Supply-based shortages can also be caused by geopolitical issues interfering with the normal business operations of a particular region or by parts going end-of-life. The reality is that no manufacturer can ever know with 100 percent certainty what will happen in the supply chain. It can be very unpredictable.
Q: What can manufacturers do to find the parts they need when the supply chain is disrupted?
A: The first thing most manufacturers will do when they encounter a shortage is go to an authorized distributor to try to find a solution. If that doesn’t work, companies can turn to a trusted independent distributor with market intelligence and a global reach. An exception-based partner that can offer market knowledge, such as Converge, will utilize its comprehensive database, sourcing strategy, and vast network of global partners to find material to fill the gap in a company’s supply chain.
Q: Should customers be concerned about where those parts are coming from?
A: We are. In this day and age, you can’t take anything for granted. That’s why Converge has invested in creating a comprehensive quality control program consisting of a 76-point inspection process and in-house advanced testing capabilities. Before any material is shipped to a customer, it must go through one of three Converge global hubs for screening. We also have an in-depth vendor screening and management process that tracks and continually scores our vendors.
Q: Do all independent distributors operate the same way?
A: In the past, I would have been inclined to say that practices were more similar among independents than I would today. But nowadays, the barriers to entry and the ability to meet industry-standard requirements separate most independent distributors from those that are best-in-class. Electronics manufacturers are looking for a certain level of supply chain confidence that can only be provided by distributors who are capable of making significant capital investments in engineering, equipment, infrastructure, and industry certifications such as IDEA. There are only a handful of independents in each region that can really scale to the quality requirements needed.
Q: So how would a manufacturer seek out a “best-in-class” partner in the independent space?
A: If possible, companies should be proactive and evaluate multiple exception-based partners before supply chain disruptions even occur. When doing so, I would audit facilities in person to verify there is a rigorous quality inspection process. Ideally, manufacturers should work with a firm that has certified component engineers in house so they are participating in the authenticity process. If an independent is not willing or able to make the investment in engineering resources and proper testing equipment, that should be a red flag.
Q: Do independent distributors have any insight on when a shortage is going to end?
A: No one can predict the future. The aftereffects of some supply chain disruptions linger longer than others. Sometimes parts are in shortage for months, and other times shortages resolve abruptly, leaving many manufacturers with surplus inventory after compensating for their shortage concerns by placing multiple product orders. The good news is that if manufacturers have already established a relationship with a trusted exception-based partner, that distributor will be ready to help with excess inventory challenges as soon as the market changes.