Dilemma: How can the Supply Chain deal with stretched lead times?

A common enemy to the flow of the supply chain is stretching lead-times which are often not anticipated. Typically within the electronics industry which I am familiar with there is warning signs that component lead times may stretch out for particular components. These anticipated stretches in lead times usually will have only a minor impact to supply chain deliveries as actions are taken. The most likely action is to increase the inventory within your supply chain starting maybe with the supplier and VMI inventories and then leading to the ODM and CM to minimize the impact to customer deliveries. The impact to the supply chain will be the cost impact in holding the additional inventory to support customer orders. For the supply chain this becomes a challenge considering the push today to reduce inventories to make cash available.

Now the most difficult challenge to the supply chain flow is on those times infrequent and unexpected when there is an unexpected worldwide commodity shortage. For the supply chain, these are times is where you only wished you had anticipated the shortage and your company stockpiled these components at almost any cost.

In my experience SRAM, DRAM, CPU’s are some of the culprits to these phenomena over the years. Today in Q2, supply chains are being challenged with stretched out lead times due to higher than expected demands coupled with slower than expected suppliers ramping of production capacity. Of course, the logistics of transportation now becomes a matter of air lifting all of your deliveries depending on the geography of the factory to the supplier location which again will inevitably increase the supply chain costs.

Here are the some other options that may be able to offset the delivery delays:

Inventory Positions-the supply chain will check all inventory within your entire supply chain including; ODM’s, CM’s, 3PL’s, Vendors and VMI Hubs.

Secondary Market/ Spot Buying – having been through these experiences in the past, the procurement team in an electronics company will usually have established relationships with solid reputable brokers who have sources for commodities throughout the world with various distributors, OEM’s and manufacturer’s. Excess stock may be available to buy in the secondary market. Again, pricing on product earmarked on the world wide shortages list can command some high premiums. Also, a supply chain must respond quickly to the secondary market as commodities can become scarce very quickly.

Product Selection- the supply chain may have the opportunity to overcome worldwide component shortage when one version of a commodity can be substituted with another version. In this example, possibly a commodity with higher or lower spec’s can be substituted for the originally requested commodity. Working with the sales teams, the customer impact can be minimized be “steering” the customer to higher or lower specified product.