Navigating Electronic Component Shortages: Strategies and Solutions

Electronic component shortages are inevitable—it’s frustrating but true. But just because they’re bound to happen doesn’t mean that these shortages need to hamstring your organization. If you invest in the right strategies for navigating electronic component shortages, you’ll be able to overcome them with minimal disruption to your supply chains.

In this blog, we’ll show you how. 

What Causes Electronic Component Shortages? Supply and Demand!

All supply chains are dynamic, shifting according to the immutable relationship between supply and demand. When demand on the supply chain grows to exceed the available supply, businesses find themselves facing electronic component shortages.

It’s important to remember that there’s more than one way for supply and demand to fall out of proportion. Sometimes, shortages come about as the result of skyrocketing demand in the face of new products. Developments like electric vehicles, the Internet of Things, or even the launch of a next generation gaming platform can all drive excitement among consumers that supply simply can’t keep up with, even at its normal, healthy rate.

Conversely, if supply plummets, there doesn’t need to be an uptick in demand for shortages to become an issue. Internal and external pressures such as workforce reductions, trade disputes, or massive events like the COVID-19 pandemic can result in manufacturing constraints or industry restrictions that drain your capacity to keep product supply steady.

Address Electronic Component Shortages by Building Leverage

While you can’t unilaterally prevent shortages, there are many ways you can navigate them when they arise.

Take a proactive approach

The inevitability of electronic component shortages can create complacency among companies, some of whom may be tempted to simply wait these downturns out. 

This is a losing mindset. Remember, not all customers are treated the same by suppliers and leverage is not always a function of being the most renowned in your space. The customers that are treated the best are those who work to proactively establish leverage with their suppliers.

Your ability to create leverage is based on being seen as easy to work with, dependable, competent, and growth-oriented. While quantifiable wins can help demonstrate things like growth potential, your behavior in working with your suppliers will also go a long way to ensuring that—when there are constraints on material allocations—you’re one of the first enterprises they think of.

Prepare and organize

Gathering comprehensive information about the factors impacting supply and demand is crucial. This data not only strengthens your case when proving to suppliers that your company is a valuable partner, but it also provides insights into the duration and causes of demand spikes or supply shortages. Understanding these dynamics allows you to strategically allocate internal resources to mitigate the adverse effects of electronic component shortages on your supply chain, revenue, and industry standing. Over time, this knowledge will be invaluable, particularly during challenging periods.

Know where you stand

Don’t just consider your own relationship with your suppliers. Think about how you compare to your competitors and what they might be doing to establish leverage as well. The more holistic your understanding of how potential shortages are affecting your industry and how others may be reacting, the better suited you’ll be to outmaneuver the competition.

Know who you can count on

Understanding who in your supply chain is a priority supplier is also important. Certain suppliers will be responsive to your needs over time than others. Just as you need your suppliers to see you as a worthy investment, you don’t want to spend time and energy trying to build leverage with suppliers who won’t come through, ultimately making your efforts an empty expenditure. 

Consider your alternatives

It is important to know what alternatives for your parts exist to your current supply choices and how hard it would be to switch to alternate components or suppliers.

Bet on the future

Make sure that your supply chain counterparts understand your company’s growth plans which can be demonstrated with actual historical demand and new product introductions. Companies with good forecasting will fare much better in times of shortages than companies that under forecast and bully their suppliers to leverage for supply.

Lytica Makes Navigating Electronic Component Shortages Easier Than Ever

Lytica’s SupplyLens Pro is designed to make establishing leverage with suppliers simple and streamlined, whether you quantify growth or benchmark your use of resources under various supply chain conditions.

With SupplyLens Pro, you can:

• Track trends in your supply chain; 
• Identify the right companies to source from and who you can create maximum leverage which is key to creating a more resilient and predictable supply chain;
• Understand your competitiveness level and what you should be paying for components as a result;
• And more!

If leverage is key to navigating electronic component shortages, then Lytica SupplyLens Pro is the best way to help with negotiations, pricing, risks, and part alternatives. With Lytica, an electronic component shortage doesn’t need to be a catastrophe. Rather, it can be an opportunity to shore up relationships with critical suppliers, identify weaknesses in your business, and proactively expand your ability to respond to future challenges.