Anyone in the electronics manufacturing space, or any manufacturing space for that matter, is most likely aware that there is a significant supply chain shortage worldwide. From six-month delays in furniture deliveries to the highly publicized automotive industry production hurdles, every industry is experiencing some level of supply chain delay and lead times well beyond anything seen in the last three decades. Almost everyone has been affected by this “supply-chain crisis” – so much so that Congress is now taking matters into its own hands by passing a bipartisan bill to help bring more semiconductor manufacturing back to the U.S., where it all began.

While we have frequently fielded questions like, “What is your standard lead time?”, the answer has gotten muddier for turnkey suppliers of PCB assemblies. The most extended lead time components used to be at 12-16 weeks; now, it’s common to see anywhere from 50-60 weeks. At NAS Electronics, we’ve seen component ship dates as far out as 72 weeks, and (in some cases) indefinite pushouts. The example below is from an industry-leading supplier, showing lead times out to 2025, indicating supply chain uncertainty.

While this is a challenging time for anyone manufacturing a product, there is hope and excitement on the horizon. Hope for new bills and funding to bring IC production back to where it boomed in America in the early years of tech. Hope for other countries to implement similar measures to boost output. Excitement because without an economic boom, none of this would be a concern.

With this odd mix of excitement, uncertainty, hope, and thoughtfulness, there are ways to mitigate your risk of a line-down situation. Here are a few recommendations to prevent delayed deliveries to your customer base.

  1. Ensure Suppliers Track Lead Times
  2. Most contract manufacturers (CMs) will assist you in supply chain management when purchasing turnkey services. Keep in mind; these companies should be looking at your product as their own. It falls on the CM to keep the line running, just as much as the original equipment manufacturers (OEMs) want to keep the product on the shelf. Working with your CM can be a mutually beneficial relationship that allows for a free flow of information and makes both sides aware of any problem components.

  3. Increase Your Forecasted Lead Times
  4. Whether you supply your components or have a turnkey solution, increase your standard forecasted lead times. A month ago, when we published our Circuits & Scotch episode on this topic, doubling the expected lead time would be a safe statement. Now, hope for the best, but prepare for the worst and triple or quadruple your expectations. Just-In-Time (JIT) manufacturing was the gold standard a year ago, but with drastically increased lead times, this has fallen to the wayside, with many companies switching to “Just-Have-Product” manufacturing. Make sure you’re booking your orders significantly in advance to lock down what stock can be secured. If you do not want to guarantee it yourself, try placing long-term contracts with your vendor.

  5. Place Long-Term Contracts
  6. Another standard of pre-shortage manufacturing was placing POs for only a few months to be more fluid and flexible with vendors and secure the best pricing. While many CMs do not like guaranteeing orders for two to three years due to component pricing concerns after 12 months, they are more open to it now to keep the lines running. Simply put, take the stocking pressure off your company, and ask your production partner to do it for you. Most CMs will provide terms, so you don’t have to pay for anything upfront and only pay after the product ships to you.

    By setting up a long-term schedule, you can give your supply chain partner the best chance to secure stock for you without having to come out of pocket until it is delivered. It’s difficult to ask these partners to confirm stock in this way if they don’t have an order for the final product. In addition, this helps assure your deliveries 6, 12, and 24 months from now to protect your customers from long lead times. With that said, make sure your product will not be revised for the length of the contract. Unexpected changes mid-run are costly both in price and lead time.

  7. Communicate Frequently
  8. This almost doesn’t need to be said as it pervades the entire article but communicate often and openly with your supply chain partners. It’s difficult for anyone to solve a problem they don’t know exists. If you have concerns for a product line, line item, or schedule, communicate openly with your partners. You may be surprised to find they are dealing with the same issues and have creative solutions to your concerns. No one is in this alone, so communicating these struggles can create a synergistic effect in critical problem-solving.

Between business being on the rise, government entities looking to invest heavily in the manufacturing industry, and the global supply chain being more accessible than ever, there is a lot to look forward to in regard to solving the shortages. Keep an eye on lead times, forecast and place orders as soon as possible, and communicate with your team to keep moving your product in this economic boom – despite the raw material shortage. If you would like to see how we can help your team with lengthy lead times, please reach out and we’ll schedule some time to discuss!

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