Supply Chains are Getting Stretched
We live in an unusual period in history when “all boats are rising.” In more normal times, one market is up while others are down, but the current mood of optimism stretches across the globe from the USA to Europe, China and beyond.
However, success brings its own problems. Shortages of some materials and skilled labor are stretching supply chains across the globe. The roll out of the latest iPhone X is the latest victim of the shortages as high-level talks were held this week between Apple and Foxconn on strategies to avoid long delays in Christmas deliveries.
The equipment and materials markets are not quite so badly affected, but what length of lead-time is acceptable. Inevitably, when most manufacturers place orders for machines they want ‘instant gratification.’ In other words, they want delivery next week. In the SMT business this is rarely possible, but how long, is too long?
In a perfect environment, you want to have to handle the smallest number of sub-contractors with the greatest capabilities and capacity to meet your current and future production requirements.
Talking to many suppliers, the inflexion point seems to be around 12 to 16 weeks. Beyond that, suppliers are likely to lose the business at an exponential rate to their competitors. So what strategies can suppliers implement to avoid such catastrophes? The best strategy is to develop and maintain a flexible and reliable supply chain of sub-contractors. Of course, entrusting manufactured sub-assemblies to outside contractors runs the risk of quality issues. However, there simply is no other way to scale and grow a business without incurring substantial fixed cost overheads that in lean times, can bring a business down.
Sub-contractors need meticulous planning, drawings, training and quality verification systems to make this work harmoniously. Increasingly with the new ‘smart factory’ initiatives, it is important to share the same internet backbone and MES system with your sub-contractors, so they become a true extension of your factory and you can see at any given time, what the materials flow for your products is and where shortages might occur that will impact your production needs.
Identifying and qualifying potential sub-contractors is an important part of your supply chain strategy. In a perfect environment, you want to have to handle the smallest number of sub-contractors with the greatest capabilities and capacity to meet your current and future production requirements.
– Trevor Galbraith Editor-in-Chief