Companies that design and manufacture electronic products such as tablets, handhelds, and other devices must fully understand how supply chain issues can impact the manufacture and sale of high-tech products.
Problems with supply chain and logistics can be cataclysmic, as missing a single part will prevent product from being assembled and sold. Until the part arrives, other parts are maintained in inventory, incurring overhead and impacting cash flow. Late product deliveries impact corporate financials and customer satisfaction.
Fortunately there are ways to plan for and navigate potential supply chain issues. This starts with understanding the market space and unit volumes for the product and constituent components, so that appropriate parts can be designed in upfront. Once a product has been designed, ongoing component management is required as short term issues may pop up with availability or price fluctuations, or as obsolescence occurs.
Short vs Long Life Components
The supply chain for electronic components can be divided into two categories – parts supporting high volume electronic product and parts supporting low to medium volumes.
High volume electronic product is typically mass produced in volumes of hundreds of thousands or millions. These products are widely sold, often to consumers, for a relatively short period of time, often up to two years. Their major components are often produced for this period of time before becoming obsolete as the next product generation is introduced with feature or performance upgrades. These components are often not available to lower volume products, since their suppliers are focused on supporting high volume manufacturers only.
Non-consumer electronic product, which includes military, medical, and industrial electronic devices, is built at lower volumes, but typically is sold for longer periods of time, often 5 to 10 years, or more. Their components must similarly be available over this period of time. Suppliers of such components are usually structured to enable a wide variety of low, mid, and high volume customers to design in and maintain a wide variety of product designs. It is crucial to identify these suppliers early in the product design phase, and then ensure the resources are in place to manage an effective supply chain from beginning to end and throughout all production.
Examples of electronic components that often fall into one of these two categories include microprocessors, flat panel displays, and industrial temperature rated semiconductors.
Long life components often cost more than comparable short life components. Reasons that short life components may cost less include: they are usually made in much higher volume manufacturing runs thereby taking advantage of economies of scale; there is less overhead for support given a limited customer set; and there is less cost for long term support since availability is time restricted. Sometimes, short life components become available through brokers for very inexpensive prices – excess inventory will have been dumped into the marketplace for a quick sale. While it is tempting to design such components into a product, the problem is that when these components are no longer available, the product might not be buildable. Changes to the product then incur significant design and verification time and cost.
Long Lead Items
Some components have long lead times, even in normal times and situations. This occurs because of sharing of production facilities among an array of products, limits in regular production scheduling for parts of uncertain demand, and the need to obtain raw materials for build-to-order items. For electronic components, some types of processors, memories, integrated circuits, specialty capacitors or inductors, crystal oscillators, and displays are often long lead items. Provisions must be made to account for these lead times when mapping the supply chain.
Lead times must be factored into scheduling production, and when quoting delivery of an electronic device.
Short term component shortages
Short term component shortages are a challenge that will inevitably arise. Due to fluctuations in supply and demand over the economic cycle and industry-specific factors that influence investment in and availability of manufacturing capacity, many electronic components undergo periods of shortage. During these periods, components are often allocated to the highest volume and most loyal customers, and associated prices usually rise. This impacts both the ability to produce and end product pricing strategy.
Currently, dynamic random-access memory (DRAM) and flash memory are on allocation with long lead times, quantity limits, and higher prices. This can be managed with appropriate processes to foresee and compensate for those shortages, by qualifying alternate parts where possible, and aggregation of sufficient volumes as a preferred buyer.
Once an electronic product has been designed and achieved production status, component issues arise in addition to standard lead times and periods of supply shortage. Sometimes, suppliers must make changes to their components for various reasons. They may need to change a supplier or a manufacturing process, which can impact form, fit or function. A semiconductor die change may resolve a critical erratum or take advantage of a more current fab node size. Sometimes, a supplier will simply declare a component at end of life with intent to cease production. Such changes are endemic to long life electronic products and must be tracked and dispositioned in a timely basis.
When a part undergoes a change, the supplier issues an engineering change notice (ECN) or product change notice (PCN). When a part is becoming obsolete or reaching the end of its production life, the supplier issues an obsolescence or end-of-life notice, which typically outlines a process and timeline to the end of sale and the opportunity to do a last time buy (LTB) of the product. Each of these notices must be evaluated by the electronic product designer, resulting in a plan of action. Actions could include performing a requalification test of the product with the updated part (to ensure the new part will not impact functionality), identifying a replacement part or modifying the design to accommodate a replacement part, or even do nothing (typical when the change does not impact the product). In the case of a last time buy, the quantity to order must be determined.
Understanding electronic component supply chain and logistics is critical for companies that develop custom electronic devices such as tablets or other hand-held electronic devices. This starts with a proper design utilizing parts suitable for long life products and then continues with diligence during production to react to changing market conditions.
Original Equipment Manufacturers that have a requirement for the development of custom electronic devices will simplify supply chain and logistics issues when contracting the expertise of SECO USA, Inc. SECO USA specializes in the design and manufacture of custom electronic devices for OEMs that have unique product requirements, especially for medical industrial, and military devices. In addition to embedded circuit boards SECO USA designs and manufactures custom rugged tablets and portable handheld devices. Contact SECO USA for an evaluation of your application.