New-Tech Europe | Aug 2019 | Digital Edition

Understanding Component Shortages (and How to Survive Them)

Graham Scott,Vice President of Global Procurement, Jabil

Managing 700,000 parts across 27,000 suppliers at any given time provides us with unique insight into key commodity trends, strategies and shortages. Therefore, it goes without saying that it's been an interesting few years in direct procurement. Since 2017, companies managing electronic components have been facing challenging times with successive waves of supply shortages, price hikes and lengthening lead times. A major surge in demand on one side and a critical shortage of parts and materials on the other are straining capabilities to meet demand. As a result, the market today is extremely constrained, especially for more standard passive components such as multilayer ceramic capacitors

(MLCC), resistors, transistors, diodes, and even memory. Many suppliers are quoting lead times averaging 20-30 weeks. We haven't seen anything like this since 1999, when lead times for tantalum hit a high of more than 52 weeks and created widespread supplier allocation due to unexpectedly high OEM demand. Suppliers eventually added additional capacity, but price increases and supply shortages continued until demand stabilized and technology shifted. What is contributing to today's turbulent landscape? As suppliers review their portfolios and make calculated bets on investments, they are shifting their capacity to leading-edge technologies

that primarily support the automotive, smartphone and Internet of Things (IoT) markets. Many of the capital investments suppliers have made over the past few years are starting to come online adding extra capacity to the ecosystem. Suppliers will closely monitor production to align with overall demand and prevent any overshot (inventory bubble) to keep a reasonable supply/demand balance. It’s critical that OEMs closely monitor the “technology roadmaps” of the supplier community. Not aligning Approved Vendor Lists with technology roadmaps in conjunction with the end product’s lifecycle could lead to potential supply disruptions and higher component prices.

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