The electronic component supply chain is growing. The 2020-2022 global semiconductor shortage highlighted the vulnerabilities of suppliers relying on traditional just-in-time (JIT) manufacturing and using sources in one geopolitical area. Many original component manufacturers (OCMs) are now expanding their global presence as countries prioritize domestic semiconductor manufacturing through incentive plans. Likewise, supplier relationships between OCMs and original equipment manufacturers (OEMs) are flourishing to decrease reliance on JIT scheduling and prioritize collaboration.
These efforts are building a more robust supply chain that hopefully prevents a similar, catastrophic shortage. According to experts, the growing use of technology in everyday life means future shortages could be worse than in 2020-2022.
Diversification and collaboration are necessary improvements to the global supply chain. However, there is one more area that needs further improvement. If we strengthen it now, its resilience will help prevent these disastrous shortages. It is supply chain visibility.
What is Supply Chain Visibility?
In general, supply chain visibility refers to the ability to track and monitor an organization’s supply chain from the point of origin to consumption. Supply chain visibility is a result of real-time insights into the movement of goods, inventory levels, and other crucial information gained from the supply chain. These insights aid shippers in improving customer service and cost controls through managing inventory in motion, proactive status updates, limiting disruptions, and risk mitigation. Sometimes, this includes some degree of market intelligence that helps organizations strategize for upcoming periods of heightened or slow demand.
Supply chain visibility paired with real-time market data provides valuable insights that optimize efficiency and reduce risk. Without clarity confusion often arises from the lack of transparency. This is something many organizations witnessed during the 2020-2022 semiconductor shortage.
What Does Lacking Supply Chain Visibility Cause?
Without supply chain visibility or the proper tools to obtain complete transparency, manufacturers, suppliers, and distributors stand a lot to lose. During the 2020-2022 shortage, limited supply chain visibility led to poor decisions such as double ordering that exacerbated rising disruptions.
Inaccurate data, unverified suppliers, and disruptions can have significant rippling effects on the supply chain. During 2020-2022, the Covid-19 pandemic, fires, poor weather, logistics challenges, and even a cargo ship blocking the Suez Canal were massive problems. However, with the geopolitical dominance of China, the Covid-19 pandemic caused a flurry of lockdowns for many semiconductor fabs. Without those facilities online, supplies dropped with no equivalent fabs available to pick up the slack.
In the wake of the rising consumer demand and lack of component stock, many manufacturers double ordered from various suppliers hoping to obtain stock faster as lead times skyrocketed. The result was costly errors, wasted resources, and a growing risk of counterfeits entering the supply chain. Furthermore, it impacted manufacturers' relationships with their clients as production stalls led to many companies closing their doors for good.
In 2021, the U.S. economy alone lost $240 billion. The extent to which the global economy suffered from the semiconductor shortage, which is still ongoing in a few remaining market sectors, could be in the trillions. Lost customers, increasing prices, decreased revenue, and growing counterfeits within the supply chain can come from limited or insufficient supply chain visibility.
Effective communication between supply chain partners that prioritizes transparency must be practiced avoiding these challenges. With better supply chain visibility, organizations avoid risks and gain numerous benefits.
To avoid this, businesses must prioritize transparency and maintain effective communication throughout their supply chain.
The Benefits of Supply Chain Visibility
Supply chain visibility is achieved through better cooperation and collaboration between supply chain partners. This can be accomplished through communication, shared information, and data that reflects current and forward-looking goals. Real-time visibility into company operations keeps OCMs, distributors, and OEMs aware of each other’s situation. It becomes easier to make quicker decisions to mitigate rising challenges sufficiently.
Alongside the capability to quickly mitigate disruptions, with comprehensive visibility over the global supply chain that extends beyond partners, manufacturers have better agility in shifting to meet changing market conditions. Paired with real-time market data, manufacturers can strategize and make decisions before the situation becomes too dire. An example of this challenge can be seen in the automotive chip shortage.
When the Covid-19 pandemic began, automotive OEMs canceled component orders expecting a slump in vehicle orders. To their surprise, vehicle demand jumped in 2021, just a year later. Most OCMs determine production capacity by the demand the year prior. With the drop in automotive chip demand, production capacity was lowered to meet the rising demand for consumer electronics—which saw a massive increase in orders thanks to the rise of the work-from-home (WFH) model--instead. This miscommunication and lack of visibility prolonged and complicated the already challenging semiconductor shortage.
Above all, supplier visibility benefits organizations by improving supplier performance, reducing risks, enhancing compliance with regulatory bodies, and increasing product quality and safety. This is mainly due to all organizations having visibility into suppliers’ operations, allowing them to evaluate and monitor performances to help identify areas of improvement. This collaboration builds stronger relationships between companies that can be immensely beneficial during times of immense stress, like component shortages.
With communication and real-time market data, future shortages can be successfully mitigated long before the market ever turns. The electronic component supply chain needs extensive visibility that can only be obtained through collaboration among OCMs, OEMs, distributors, and others.
The only other option is a comprehensive digital tool that utilizes market data to achieve extensive visibility.
Market Intelligence and Monitoring with Datalynq
The electronic component supply chain is a global behemoth that continues to grow. As new facilities begin construction, another link is added to this hundreds-of-miles-long chain. Communication and collaboration between OCMs, distributors, and OEMs help prepare each other for future endeavors or changes within an organization’s process that might affect the other. However, it is hard to gain total visibility into every sector of the electronic component supply chain considering its vastness. That is if it is done manually.
Visibility can be achieved through digital market intelligence tools that gather mountains of real-time market data and quickly present decisive insights.
Datalynq is the market intelligence tool for the electronic component supply chain. With a 50,000 ft perspective on the risks surrounding a bill-of-materials (BOM), manufacturers can quickly review supply data associated with any part, including its lead time and life cycle status. Datalynq can alert users to obsolete, inactive, or not accessible parts long before they become a challenge or require an engineering redesign. With its scoring system, Datalynq can warn users of existing challenges for specific components on a BOM before production begins including design risk, multi-source availability, market availability, price, and inventory level.
This real-time market data comes directly from the world’s leading e-commerce site for electronic components, Sourcengine. Data is regularly updated and combined with predictive analytics so users can be aware of upcoming challenges that might need mitigation. If a problem does arise, comprehensive case management documentation helps users prepare long before a disruption occurs.
Gain better supply chain visibility through Datalynq’s free 7-day trial today!