by Minesh Patel, Senior Director, Supply Chain Solutions, Benchmark Electronics
Electronic product manufacturing depends on strong and predictable supply chains for parts and materials. As automobile manufacturers learned at the onset of the COVID-19 pandemic, lack of necessary semiconductor supplies results in a lack of manufactured new automobiles for market. Electronic manufacturers must develop modern production plans with resiliency and flexibility to overcome bottlenecks and changes in supply chains for parts and contracted services.
By teaming with multiple suppliers from different global locations and not depending upon single-source suppliers it is possible to achieve supply chain versatility. This approach to balancing geographic sources to add supply chain resiliency will help to regularly produce a wide range of electronic products and meet the tightest production deadlines.
Electronic product supply chain issues have surfaced with the spread of COVID-19 such as delays in receiving parts and materials from a supplier due to rising fuel costs or a supplier’s shortage of personnel. In some cases, a component supplier’s failure to receive parts from their suppliers prevents them from maintaining a suitable inventory of key parts and materials. The once almost-ideal global “just-in-time” manufacturing model can no longer be supported by lack of parts and materials or lengthy delays in receiving them.
World events impact supply chain planning. One current example of this impact is how suppliers within the European Union have been affected by the war in Ukraine. The cancellation of flights has slowed down parts and materials deliveries, delaying the manufacture of products in factories around the world. But COVID-19 has had the most far-reaching impact on the electronics manufacturing supply chain, especially at the semiconductor level.
With the apparent “hibernation” of consumers at the beginning of the pandemic, demand for analog, digital, mixed-signal, and RF/microwave semiconductors decreased. As a result, semiconductor foundry managers had to estimate process run sizes to match decreased global demand. As semiconductor demands increase, foundry managers must seek higher yields (and often costly investments in the foundry to produce them) to support intelligent supply chain strategies.
Modern electronic product supply chains are global in nature, with suppliers often at great distances from a manufacturer in need of their parts and materials. Electronics manufacturers have come to rely on supply chains starting in East Asia, specifically from China and Taiwan, and notably for semiconductors and printed-circuit-board materials. Southeast Asia is an attractive base for suppliers because of its geographic, regulatory, economic, and demographic advantages.
But a reliable supply chain strategy requires diversification. Focusing on one or two suppliers has never been a safe, long-run manufacturing practice. Even the best suppliers can face damage from accidents and threatening weather conditions. For that reason, Benchmark has long maintained its parts and materials for manufacturing by working with multiple suppliers in any area. In East Asia, in addition to China and Taiwan, the company collaborates with suppliers from the Philippines, Vietnam, Thailand, Malaysia, Indonesia, and Singapore.
More suppliers also mean less risk. Loss of inventory from a sole source causes a bottleneck to a production line and explains the need to coordinate supply schedules simultaneously with multiple suppliers. Some manufacturers have pointed to the effectiveness of a fully domestic supply chain, but all the suppliers of the parts and materials needed for an electronic product may not be available within the same country or location. For semiconductors, for example, (of which there are many types and technologies), building a foundry capable of producing semiconductors requires construction time of at least 10 years.
However, after a decade, that technology risks becoming obsolete. In addition, the amount of electric power required to run all the fabrication processes for standard silicon CMOS mixed-signal ICs can be equivalent to the power consumption of a small city with a population of 100,000 or greater. Such a power grid must be installed along with the construction of the foundry. In other words, suppliers are simply not added overnight.
Modern supply chains are anything but simplistic. They include required and complex process management to move an essential component or material from a supplier to a manufacturer. Some of these responsibilities include import/export management, inventory management, shipping management, supplier management, supplier management, and warehouse management. For any modern electronics product supply chain, flexibility and resiliency are keys to maintaining the inventory needed to achieve the performance goals for the final product.