Mitigating Supply Chain Risk

In 2010 and 2011, the electronics world was abuzz regarding disasters that impacted or threatened to impact the global supply chain. Thankfully, none of our customers was negatively impacted as many electronic components became scarce due to floods and earthquakes in the world’s top-producing regions. That is partly due to the nature of the Tier 3 manufacturing businesses (the parts our customers use are generally highly available in large quantities on shore, and we need relatively small quantities). But luck also played a role: none of our customers’ parts were made by a single source that was devastated by a natural disaster.

While recent years’ events made for exciting long-term fodder for industry media, the truth is that the supply chain is always at risk. The availability and cost of parts fluctuates daily – sometimes hourly – based on a range of forces, from supply and demand to economic crises, natural disasters and changing regulations/legislation.

To mitigate the risk that supply chain fluctuations can pose to business plans, we advise our customers to consider these two key strategies:

  1. Forecast & bond inventory. If you are producing product in consistent volumes, then you can forecast and bond inventory with suppliers. Bonded inventory means that a supplier holds a percentage of your forecasted inventory in stock for you at all times.
  2. Seek design for manufacturing advice. Have us review your product designs before they are hardened so that we can identify and mitigate risks associated with single-sourced components, parts that suppliers have on allocation, and outlier suppliers with poor or unknown reputations.

For more details, read our short paper on mitigating supply chain risk, or contact us to leverage our supply chain expertise and strong purchasing relationships.