How Top Procurement Teams are Achieving Best-In-Class Spend Results in 2024 and Beyond
A shift is happening in the electronic component market. An optimistic return to normalcy after the worst of the COVID-19 pandemic has caused electronics manufacturers to change their procurement strategies once again. But what are the top procurement minds doing today to get ahead for tomorrow?
This post addresses a key procurement industry trend that we’ve observed throughout 2024, and expect to continue well into 2025.
A Renewed Focus on Inventory Right-Sizing
Over the past few years, due to the COVID-19 pandemic and other supply-impacting incidents, electronics manufactures shifted away from their lean inventory strategies and began stock-piling components to safeguard themselves against further supply shortages. While it’s an approach that made sense at the time, they’ve been left with excess component inventory and increased storage costs now that their supply chains have mostly normalized.
Therefore, since late 2023 and continuing today, many electronics manufacturers have been focused on right-sizing their component inventory levels. Instead of continuing to build up their supply reserves, they’re looking to use up their existing supply and once again return to a leaner inventory model.
Changes in Component Supply and Pricing
By focusing on working through the component inventory they already have in stock, manufacturers have rather suddenly curbed their new component spend quite significantly. This in turn has left suppliers with excess component capacity, having previously beefed up their production output considerably in order to play catch-up and meet the snowballing demand caused by COVID and other crises.
As a result, what we’re seeing now in the electronic component market is a great deal of pricing movement. Overall, component prices are coming back down closer to pre-pandemic levels as suppliers look to move excess supply. On top of that, the shift in pricing power from supplier to purchaser is causing significant pricing volatility and frequent fluctuations. Components such as memory cards that might normally be quite price stable are experiencing weekly spikes and dips, spurred on by aggressive supplier-manufacturer renegotiations.
These rapid fluctuations mean that having access to pricing intelligence and analytics is now even more crucial. No longer can an OEM rely on long-term historical trend data, as today’s market is simply changing too quickly for that. Real-time component spend data is needed in order to stay on track.
“You don’t have the 52-week lead times anymore, and for the first time in a while suppliers aren’t totally sold out. They’re realizing they can no longer charge whatever they want and they have to compete with their competitors again on price, so now the Lytica spend platform is more valuable than ever.” – Ken Bradley, Chairman and Chief Strategy Officer, Lytica
Recommendations and Next Steps
To keep up with the rapidly-evolving electronic component market, we recommend that electronics manufacturers strongly consider the following tips:
- Tap Into Real-Time Data — If you’re not already using Lytica to access real-time electronic component spend data and compare your spend performance against the market, now is the time to do it.
- Share as Much Data as Possible — The more spend data you share with Lytica, and the more often you share it, the more accurate your spend analytics and savings recommendations are going to be. In the current component market, data volume and recency are key.
- Implement a Category Timeline — Due to today’s pricing fluctuations, we recommend implementing a regimented category timeline for reviewing each category of spend on a regular basis. Frequent check-ins will keep you up-to-date and in control of your spend.
Lytica’s SupplyLens™ Pro platform is the only electronic component pricing tool with real-time spend data from actual manufacturers, featuring over 100 million verified parts with pricing data updated constantly. If you’re not yet analyzing and improving your component spend with Lytica, reach out to our team today for a demo.
About Lytica
Lytica is an electronic component spend analytics and risk intelligence company that uses real customer data to help companies make their supply chain more cost-transparent, more resilient, and more predictable. Lytica’s advanced electronic component market intelligence platform employs machine learning and AI to analyze real-world pricing data, offering true market insights to reduce costs and mitigate supply chain risk. Fortune 500 and blue chip companies around the world rely on Lytica to find better prices, manufacturers, and suppliers. To learn more, visit lytica.com.
