Components – The increasing lead time saga continues
Bob Evans, CPMR
Rolling Meadows, Ill.
Recently, while talking to an electronic manufacturing services provider with whom we are associated, the subject of lead time slipping came up as our customer was expediting his assemblies. On these boards are some components that are rather unique to our customer’s product for which there is a very limited number of suppliers. Our discussion on lead times was, I thought, limited to those harder-to-get items. But when we talked about the troublesome parts, the EMS fellow’s response was, “No, the unique parts are not the only problem; standard parts are going out to 36 and 40 weeks!”
In its Q4-2017 “North American Electronic Component Sales Trends” survey, ECIA received feedback from close to 100 manufacturers, distributors and manufacturers’ representatives. The clear majority of distributors and manufacturers’ representatives reported steadily increasing lead times; and the manufacturers reported stable to increasing lead times. The biggest culprits cited were capacitors, inductors, resistors and semis. Most likely, this is not a surprise to any of our readers as I suspect we are all living it now.
In her article in the Nov. 16, 2017, issue of EPSNews, titled, “What’s Behind the Component Shortage,” Barbara Jorgensen notes that the current component shortages are not only about increased demand. She goes on to say: “Any number of factors — production capacity, supply chain disruptions, obsolescence and technology migration — can contribute to product scarcity.”
Component manufacturers are catering to their largest consumers — and I suppose that makes sense in the short run — but the burden is falling out among the larger marketplace. They are also opting to concentrate on newer and higher margin components, leaving the older parts, whose margins have eroded, to languish within their capacity limits. Lower average selling price items, the so-called “popcorn items,” are driving lead times because the profits that can be reaped from these do not support investments in the capital equipment required to increase capacity. Of course, some customers are, dare I say it, double-booking orders in the hopes that one of the suppliers comes through earlier.
As we enter 2018, the picture does not appear to be improving any time soon. Most industry analysts predict this condition to last well into the year, and some are even mentioning recovery in 2019. It appears that this state of business will be around for some time and that it will affect all our customers at some point. We can only take solace in the fact that no one seems to be immune.
Materials, Assembly, Production & Supply – Keeping up with fast-moving technology advancements is key
As I write this column, 2017 is almost in the rearview mirror. We just came through Black Friday, Small Business Saturday and Cyber Monday. From all indications, a lot of people spent a lot of money. Also, over the Thanksgiving holiday, it appears that a record number of people traveled. The stock market is booming. All this seems to indicate a growing economy. We certainly hope so and trust that it will continue into 2018. We should all evaluate what we did well in 2017 and look at ways to do better, and more profitably, in 2018.
I just read an article in Industrial Supply titled, “Selling is Changing — Are You?” It was pretty thought-provoking. It looked at selling 20 to 30 years ago. Think about it. Salespeople probably had detailed scheduled “routes” that they did on a regular basis. We sold products and built relationships. We did not have cell phones and Internet. We depended on those personal relationships, and most sales were “transactional” or product sales. Moving forward, that personal relationship became more important since we and our competitors had much of the same product and pricing. The scheduled “routes” have mostly disappeared, and we cultivate the relationships with targeted calls and immediate contact availability by email and cell phones. We make presentations via webinars, Skype and conference calls. However, to be competitive, we must embrace the best of both worlds.
Relationships are important, but in today’s environment, millennials rely heavily on technology, meaning they look for it online, purchase it and move on. Here is a great example. On CyberMonday, Amazon processed some 700 packages per second.
Relationship had little to do with those sales. Thankfully, in our business there is still a significant amount of sales that depend on fulfilling a need that simply does not fit well into the buy-it-online mold. Here the relationships still play a significant role.
Another thing we encounter is the changing workforce in the plants we call on. For many years, the average employee performed repetitive tasks and did not require extensive technical knowledge or training. In today’s manufacturing environment, there are likely more computers (or computer-based machines) than machine tools on the floor. This means that the workforce of today must be more skilled and trained in various duties. They need to be a mix of a machine operator, engineer and service technician. In another report I read, respondents listed the top three challenges they faced, in the following order: 1) keeping pace with evolving technologies; 2) managing client (customer) expectations with reality as new solutions are promoted; and 3) finding and retaining technical and sales staff.
We, as salespeople, and our customers face the daunting task of keeping up with the fast-moving changes in technology. It requires that we are constantly vigilant in our quest to at least stay current and hopefully have enough insight to visualize and prepare for the future innovations that seem to constantly bombard us.
We look forward to 2018 as we prepare for an exciting future for us, our principals and customers.