The world is facing a global chip shortage that has hampered industries dependent on small-scale electronic components. From car factories to groceries, the chip crisis is both exposing
This was not only a stumbling block for manufacturers, but it also sent waves of shock through entire industries, causing production to stall and prices to soar.
The critical chip shortage has given businesses a wake-up call to rethink their supply chain strategies with a view to the future.
Before the end of this article , we will take apart and explore the present chip shortage and see how lessons learned now can lead to greater resilience in supply chains down the road.
So let’s march on!
Chapter 1: The Present Chip Shortage
Microcontroller IC and other various chips serve as the building blocks of electronic devices, from your cell phone to your car’s computer system. However, due to a series of unexpected events, these chips become rare.
First, the global pandemic forced the closure or reduction in production at almost all chip factories in order to protect workers from infection. Then, it became even more difficult to obtain raw materials needed for making chips as tensions mounted between different countries about their national interests.
The result was that although there were fewer chips, no enterprises could keep up with production. Finally, the price of chips also naturally went up because of this short supply.
The chip shortage exposed the traditional supply chain’s weaknesses in several ways.
- Over-reliance on Single Suppliers or Regions: A limited number of suppliers, or production concentrated in certain geographic areas, left companies vulnerable.
- Just-in-Time Brittleness: Companies that emphasized keeping semiconductor inventory low had not prepared themselves for this day.
- Underinvestment in Older Chip Technology: Companies that emphasised cutting-edge chips had insufficient stock of older ones, which are needed by various industries.
Building Resilience: Lessons Learned
The main lessons to be learned from this crisis are in the challenge itself for creating a more resilient future.
Here are some key takeaways:
Diversify your suppliers.
As we saw in the previous examples, depends too much on a single supplier or a particular region for making your chips can be bad news indeed. So don’t have all your eggs in one basket! Companies have to diversify.
The idea is to spread out country from which you source your components. Not only will that mean a significantly lower level of risk, but if one area is disrupted, then your entire MCU IC operation isn t put in jeopardy.
Collaborate with Chipmakers.
To anticipate future demand and to secure production capacity means companies need the cooperation of chip makers and suppliers.
Companies have to strengthen an already strong partnership with the other stakeholders involved as well. This partnership will then put them ahead of the game should a shortage occur.
Look Past the Costs.
Cost can be said to be the most important factor in supply chain. However, companies which ignore other aspects of supply chain management will ultimately pay a heavy price. So a lesson to be learnt here is take an all-around approach that covers reliability, delivery lead times, potential risks and expense.
Investing in the Future
An old truism, but it ‘s true You have to prepare for the long term. Being able to withstand a chip shortage or any other kind of calamity means you should build more chip factories. This may take time, but it ‘s one option you can always count on for fending off future scarcities.
Strengthening and encouraging investment in chip production forms the basis for the entire supply system, and it reduces dependence on limited existing places in earth where microcontroller embeds are being carried out.
Strategies for Constructing Resilient Supply Chains
Now, after having experienced firsthand such vulnerabilities and learnt profound lessons, can companies take any concrete measures to lessen the impact of a future shortage? The following are some key strategies which make for a more resilient supply chain:
Policy Segmentation
Not all components are on par. Determine those chips which are most critical to your operation and put them in a sequence of priority according to the following standards:
Time of supply: How long it takes to obtain a chip from the manufacturer
Concentration of Suppliers: Suppliers from whom your operations rely on chips, are there several different ones or only one big one?
Geographical Risk: Find out whether the region in which your chips are made might have disruptions.
When you do things that way, you can lessen the effects of any disruptions that might happen in these high-risk areas or in the whole system.
Using Uniform Models
A company can go back any time to using standard parts across all products. It will make it easier for them to vacation other supplies if not all chips are available, which as a side effect certainly helps cushion bottlenecks. For example, Tesla uses the standardized version of microcontroller IC, which makes finding electronic components easier.
Double Down on the Crucial Bits
The key to addressing a sudden shortage in chips is for enterprises to keep a backup inventory. Companies should store important chips on hand, and they need multiple providers. That way if a disruption occurs, not all of your eggs are in one basket.
Real-time Feedback
It’s essential to monitor in real time, such as using cloud-based systems (even AWS as with BMW). These software packages can help a corporation predict future supply chain problems and other disturbances by spotting them early enough for action to be taken.
Cross-Functional Collaboration
Lastly, a strong supply chain requires teamwork. Every organization needs to be a part of a good decision-making system for it to work. All the departments that need to be involved, like sales, engineering, planning, and purchasing, need to be there. Everyone’s informed and therefore less mistakes occur.
Key Takeaways
The global chip shortage serves as a sharp warning to the problem of over-reliance in traditional supply chains. Relying solely on one source, pursuing just-in-time efficiency with no backup on older chip technology when a breakdown hits has left many companies scrambling.
Yet the crisis has also afforded valuable lessons, part of the company can help not only to deal with future troubles but also dampen initial chaos with new factors coming into play. To learn more about the sale and purchase of electronic components, visit Partstack website today!
