One of the defining features of EDX is our ability to offer OEMs a solution capable of helping them maintain “long-term” product lifecycles. While such phrasing is accurate, what “long-term” actually means varies from industry to industry. What is long for the smartphone Market, for example, is not on par with even the shortest medical device lifecycle.
Following this logic, it stands to reason that the industries that would require long-term Inventory storage capabilities to be somewhat limited. If the lifecycles of my products rarely stretch beyond three or four years, you might think, then there’s little reason for my company to consider such a need.
Not only is this false, but such thinking has the potential to significantly handicap your supply chain’s ability to adapt to market disruptions. Instead of defining “long-term” in relation to your product’s lifecycle, look instead at its length in proportion to the lifecycles of the components used to create it.
There are two factors currently in play that are working against OEMs in the current electronic component market, supply and demand, and both have seen dramatic reversals in recent years.
“The only time an OEM couldn’t get adequate supply was when — as an example – a factory burned down, and inventory was destroyed,” said Landsdale Inc. President Dale Lillard while recalling how easy sourcing electronic inventory used to be. As hard as it is to believe, the market’s primary concern back in the 1980s was an inadequate component demand to match a component surplus. Many component manufacturers would adapt to this by offering large-scale OEMs (especially in the aerospace, defense, and medical fields) the option of sourcing competition-free components that would be available for as long as the limited customer pool desired.
Fast forward to 2018, and the tables have turned with component shortages nearly across the board expected to impact OEMs well into 2020. In July, investment firm Stifel released a detailed report containing the following:
“Lead times remain elevated across a number of components, including capacitors, resistors, memory, and certain discretes, according to our analysis of distribution data. We continue to see signs of double ordering as customers scramble for parts. The multi-layer ceramic capacitor (MLCC) shortage is the most severe, with many parts seeing order-rescheduling requests from customers waiting on MLCCs or other parts.”
The shortage is so severe that, in some markets, once-commoditized components are going into allocation – and in some cases transitioning into obsolescence – before their initial production run. This is to adhere to the demand of the industries most responsible for currently driving the market: automotive and Internet of Things (IoT).
Facing this knowledge, it seems silly to designate any electronic product as one with a short lifecycle; if the components required to manufacture it aren’t even available long enough to enter the open market, every product lifecycle will be long. Whether it’s 15 years, five years, or two years, each lifecycle will still face the same issue – and each corresponding OEM will have little choice but to acquire critical inventory at the front end of the production run through last time buys.
To do this, of course, also necessitates having an infrastructure available capable of securing electronic inventory long term. Does your company require long-term storage capabilities? If you are an OEM operating in the current electronics marketplace, then your answer should be an emphatic yes.