Creating a resilient electronic component supply chain in the face of a recession

Electronic Component supply chains serve as product highways creating a clear path from concept to delivery. A great supply chain is frictionless, fast, and efficient. Many factors contribute to the quality of a supply chain, some of which are beyond our control.


The past two years have been extremely difficult for supply chains. Even those who were well prepared likely didn’t escape the pressures brought about by Covid. It was the perfect storm of skyrocketing demand coupled with challenging new virus protocols and dramatically reduced staff. Manufacturing and delivery struggled to keep pace, and shortages became commonplace. Escalating demands and the inability to keep up caused prices to soar.


We are now on the other side of the pandemic facing a very different problem, a looming recession. As the dust settles from covid and the chaos calms, we are left with tired supply chains, a surplus of products, and dwindling demand.


It is a safe bet that as we enter this new period, we will see a sharp price decline rather quickly. While this price drop may appear to be a welcome change, it will also cause unintended disruptions to supply chains.


These cycles of shortages and surpluses are nothing new, but each brings with it a unique set of challenges.


Tips to prepare a strong supply chain for the future

As we move into this next economic phase, data and technology will be key factors in preparing a strong supply chain. With the availability of technology, collecting and using data to make informed plans and processes is easier than ever. Savvy supply chains will work hard to streamline software platforms to ensure they all work together. Digital organization and thorough processes prevent overlap or missteps.


Additionally, high-level leadership will help to set apart the best supply chains. Companies that employ a Chief Product Officer (CPO) will perform much higher than those that don’t. It is vital to have someone at the top leading the company and managing the flow of products.


Ultimately it is important to remember that while we can be prepared, we can’t always predict what is to come (take Covid, for example), so ensuring your resilient supply chain will help you withstand adversity.


What can’t you count on?

Before discussing steps to strengthen your supply chain, it is important to note that there are things you can’t count on when planning for the future. First and foremost, the saying know your audience should come with a note of caution. People are individuals, and their behaviors will vary greatly. Predicting how people will act or react to future scenarios is an exercise in futility. Leave room in your planning for people’s differences.


Best practices should be reviewed closely, they can often be stuck in time and irrelevant. It is important to assess any best practices being followed to determine if they are still working; a more efficient solution may be available. Time provides knowledge; as people’s behaviors differ and change, so do processes and practices.


Considerations for a healthy supply chain

Planning for a strong and healthy supply chain takes research, strategy, and prediction. It is important to make sure your suppliers are strong and diverse. Ideally, access to supplier financials would allow you to perform a resilience test, but that might not be a possibility. The next best option is to study their operational performance to understand their risk level.  Note delivery times, the quality of products and materials, and any other holdups in their process that could affect your supply chain.


Don’t rely solely on the size of a company when evaluating risk, unfortunately, big doesn’t necessarily translate to security. In fact, companies’ average life cycle is getting shorter.


Use multiple vendors in multiple geographic locations to source your supplies. This strategy mitigates geopolitical risks and the risk of natural disasters. Prepare for disruption by always having a backup plan in place.


Make time to meet and engage with suppliers – it is important to the long-term success of your supply chain. Relationships will carry you further than transactions when challenges arise. Be aware that any interactions with suppliers, vendors, and customers reflect the values and ethics of your supply chain.


The future of your supply chain depends on you! Data will be key in planning, make sure you are constantly collecting and recording analytics.  Be prepared for more custom components in the near future. They can offer a competitive advantage but also monopolize staff. Diversify your vendors to minimize risk and maximize reach. And remember, everyone you do business with is on your team – so treat them that way!


Technology is rapidly advancing to offer new efficiencies and securities every day. Taking advantage of automation and AI to strengthen your supply chain is smart. The combination of technology and skill helps create a world-class supply chain.


Learn more about navigating a world-class supply chain during a looming recession with Lytica’s CTO Ken Bradley


Watch the webinar here

Ken Bradley
Ken Bradley

Ken Bradley is the Chairman/CTO & founder of Lytica Inc., the world’s only provider of electronic component spend analytics and risk intelligence using real customer data.

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