March 2019 - Component Shortages: The Smart Way to Buy
Published on: 04/03/2019
Simple ways to work closely with your electronic component distributor to mitigate unnecessary risks
The electronic components market is in popular demand with a wealth of strong new opportunities, applications, mergers and acquisitions having emerged throughout 2018.
This year is set to be another strong year for electronic components which in turn means component prices and lead times will most likely continue to rise.
The electronic component market is making it increasingly difficult for OEMs and buyers to obtain components required for builds and new product developments because stock availability is extremely limited and pricing is set to rise because demand is at a market high. This is impacting and delaying new product developments and makes it extremely difficult for manufacturers to forecast their annual component usage list. It can also be hard for OEMs to keep up to date with component shortages and marketplace updates, particularly if they’ve outsourced manufacturing to an EMS provider.
One of the most advantageous benefits of working with an electronic manufacturing services provider is relinquishing control of material procurement. However, when the market and supply changes it’s imperative that OEM’s work closely with EMS providers to resolve these issues and find a way to continue fulfilling demand for their products and services.
At GD Rectifiers we work extremely closely with our customers to ensure we communicate industry updates, component shortages, alternative components and component obsolescence. We keep our customers informed of new component launches, benefits of using each component and when certain lines are set to be phased out by manufacturers. We make it our priority to inform our customers on market activity so that they can reassess, plan and forecast their requirements accordingly.
In the current state of the market, the only way to buy components is the smart way. We share our top 6 tips on how you can shop smart this year to ensure component shortages have minimal disruption to your supply chain.
1. Identify the current market state and how it affects your business
Hoping the market bounces back and component allocation improves is unlikely to happen anytime soon, don’t sit back and ignore the issue, speak to your distributor and EMS provider to devise a product plan. Discuss a priority product list and be open with your target pricing, taking in to consideration that the market is currently booming and product is hard to source.
2. Share your product forecast as soon as possible
It’s important that you share your product forecast for as far ahead as possible with your distributor, this will enable them to start sourcing components more cost and time efficiently. If you only give your distributor short term visibility on your requirements it is likely that they will not be able to secure the stock levels you require when you place your next order, which will in turn impact your lead time.
3. Respond and move quickly
Remember to respond to price and lead time issues quickly, product is limited and will not stay on the self for long. If you cannot accept any alterative parts you must review the price and purchase components as quickly as possible. It might be that your distributor identifies a source of stock but need you to agree to a short-term price increase or extended lead time, you need to review the offer and move quickly to avoid missing out on the stock.
4. Explore alternative components
Work with your distributor to identify alternative components, discuss the differences in product technicality and performance and review the current price and lead time offering on those parts. It is worthwhile putting this list together and keeping it on file, even if you don’t use alternative parts on this occasion you can always refer back to it and know that you have a back up plan for when the market next experiences high demand. Share the list with you team on engineers in-house so they can explore every option in detail when allocation strikes.
Decide as a business whether design consistency and using the same components is important to you or if keeping to set budgets and cost-saving where possible by using alternative parts is more beneficial to your business.
5. Work with your distributor
Avoid placing unnecessary panic buys with your distributor, it is key to identify your stock priorities and work on those first. This will allow your distributor time to concentrate on your core requirements and get orders in place before dealing with other enquiries. It’s also important to rationalise your buying strategy, panic buying can lead to problems further down the line and you could end up swimming in excess stock that you can’t cancel.
6. Trust your distributor
Trust that if there is stock available, your distributor will find it and quote you.
As an OEM, you can prepare and plan for these situations by asking your distributor to re-quote or re-validate quotations. If you have an agreement in place, pricing, stock liabilities and quantities should already be listed, ensure these are reviewed monthly or quarterly to avoid any sudden changes to your supply. If you place back-to-back orders, always ask your distributor to confirm the lead time before sending through an official order to ensure your price and delivery expectations are met.
We stock a large range of electronic components including: diodes, thyristors, GTO thyristors, phase control thyristors, thyristor diode modules, rectifier bridges, MOSFETs, IGBT modules, discrete IGBTs, high voltage rectifiers, high voltage diodes, power relays, gate drivers, high speed fuses, IEC and British standard fuses, low voltage UL and CSA branch circuit fuses, medium voltage fuses, AC capacitors, DC capacitors, energy storage capacitors, low temperature capacitors, snubber capacitors, custom capacitors and obsolete semiconductor parts.
Discover our complete range of products on our website here.