09 Jun 2021

Mid-Year 2021 Supply Chain Update

Company Updates

As we hit the middle of 2021, we only have 30 weeks remaining for the year. Terry Arbaugh, our VP of Sales and Marketing, talks about the current state of the supply chain in electronics manufacturing and upcoming disruptions into the beginning of 2022.

Watch this video for an update on current conditions and upcoming supply chain challenges:

 

 

Transcript

Believe it or not, we’re already into June.

Which means there are less than 30 weeks left until the end of the year.

Since many components already have lead times that are longer than 30 weeks,
I wanted to provide an update on what we’re seeing in the market,
and give some guidance on what you can do to mitigate risk.

Now, if you talk to anybody who's been in the electronics manufacturing or sourcing worlds for a long time,
they’ll tell you these are the worst market conditions they’ve ever seen.

There has been a massive shift from a just in time model, to a just in case model.

And that means, a lot of companies, large and small, are ordering components well in advance of even knowing when they might need them, or when they might know they have a demand planned for finished goods.

They’re just ordering long lead time components and sitting on them just to make sure they have them in their possession and they are able to get them, is really what’s going on now.

That’s making it difficult not only to secure components in large quantities for mass production builds, but it’s even making it challenging to secure the scraps, the low quantities, for product development and engineering validation builds.

Like I said, since we’re already in June, manufacturers, like us, are already in the ramp up phase getting ready for the upcoming Christmas season.

With, of course, long lead time challenges in the market, planning and getting ready to take advantage of build capacity toward the end of the year, is just continuing to be an increasing challenge that we’re seeing.

We’ve got a few things that are always issues that we have to face when we’re talking about planning for production.

There’s a week long holiday at the beginning of October in China where all the factories close down, and of course, we have Chinese New Year that falls at the beginning of the year, every year.

And this year it’s actually early, it falls on February 1st.

And that means we’ll start seeing factory closures in late January, and usually that goes for 2 to 3 weeks, generally, to add to your production lead time.

Keeping those key dates and holidays in mind while we’re thinking about our planning is really, really critical. 

There’s another complicating factor coming up in early 2022, that’s going to hit all of us as well. 

And that is the fact that the Winter Olympics are in Beijing and start on February 4th.

Now the last time the Olympics were in Beijing, some of the factories were shut down a month or two in advance, in an attempt to improve the air quality around the city, as the eyes of the world turned to watch the Olympics.

Now we are located in Southern China. So we don’t expect to be impacted by the closure, but certainly suppliers and vendors that are in the supply chain located in that area, are at a higher risk of being forced to close down for a period of time, which increases the risk for all of us.

Throw all those things into the fact that logistics is still a challenge. 

There is a shortage of containers available coming from China to the rest of the world.

Also, we’re still seeing, of course limited air travel, which reduces the amount of air cargo space available on flights.

All we can encourage our customers to do is to over communicate with your manufacturing partners, order long lead time components early, and also discuss placing those larger finished goods blanket PO’s early, potentially even including some extended delivery windows for those finished good blanket orders.

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