PCBs
Riskier times demand increased versatility
Who would have predicted the year just gone and the one we are journeying through now? With COVID-19 ushering in global tragedy, economic disruption and political upheavel, pressure has increased significantly on traditional supply chains and their weaknesses exposed. Steve Marshall, managing director at Offshore Electronics explains why hybrid supply chain models promote better long-term health in these riskier times
A
ccording to a recent interview with economist and partner at McKinsey Global Institute in Washington, DC, Susan Lund - in which COVID-19 and supply
chain recovery were discussed - mention was made concerning the world being a riskier place. Lund commented: “on average, companies now will expect to see a disruption to their production lines of one to two months, which is a very long time, every three-and-a- half to four years.”
With such disruption becoming more commonplace, how can the electronics component industry develop more robust supply chains to weather future storms? Well, a lot can be learnt from the past year, as companies have sought to adopt more diversified approaches to their ways of working and spread the risk across multiple suppliers and production regions.
To reshore or not to reshore, that is the question?
There have been – and continue to be – extensive discussions in boardrooms and government departments around the world about the merits of reshoring in the industrial and manufacturing sectors. These discussions
were originally prompted by the threat of international tariff wars following the 2016 presidential elections, together with risks to supply chain disruption caused by factors ranging from security threats to the growing number of extreme weather events associated with climate change.
More recently, however, the reshoring debate has taken on a fresh urgency with the advent of the COVID-19 pandemic, which in its early stages shut down large sections of industry and fractured supply chains around the world. Reshoring – or bringing production back closer to home – is gaining traction in the face of such economic, geopolitical, health and weather uncertainties that continue to play havoc with global supply chains. Although there has been increasing pressure placed on traditional supply chain models, which are likely to have a transformative long-term effect, the global supply chain in electronics is not going to disappear. In fact, banking giant ING says that electronics manufacture has increased its reliance on complex value chains in recent years – compared to industries such as automotive and textiles. “Specialisation in electronics value chains makes it difficult for firms to diversify their suppliers across countries to increase supply chain resilience,” it says.
Increasing the flexibility in extended supply chains
However, one way of remaining within these extended supply chains – while not having
34 March 2021 Components in Electronics
to deal with their complexity – is to use a local contract electronics manufacturing (CEM) partner. A CEM can carry out a range of subcontracting work – from assembly to testing – on state-of-the-art equipment, as well as sourcing components competitively. Crucially, it will maintain the necessary links with global supply chains – but will effectively act as a local manufacturing partner for OEMs.
As a CEM, Offshore Electronics is already beginning to see contract electronics projects that were once outsourced by UK manufacturers to the Far East being reshored to the UK. This is being driven by a realisation that local suppliers are often better placed to offer a faster response, with a higher standard of communications, combined with the ability to produce smaller volumes of customised products at prices that have now become extremely competitive when measured against suppliers in the Far East.
The evolution of the hybrid supply chain model
What is beginning to evolve in the electronic components sector is a hybrid supply chain model. High volume parts, especially those where long lead-times are less important, will continue to be produced at a distance in parts of the world where manufacturing, labour
and shipping costs are relatively low. However, what is beginning to change is the assessment of risk to supply chain disruption, with companies adopting a much more diversified approach, spreading their risk across multiple suppliers and production regions.
The production of lower – but not necessarily, low – volume, custom-built or specialised high value printed circuit board assemblies (PCBA) is beginning to be moved back to suppliers located close to the point of product manufacture and/or market consumption.
This model offers security of supply, with far greater flexibility. The sourcing of less critical and lower value parts can continue to be offshored to low-cost production centres, while the skills and production resources offered by local electronics manufacturing partners can be deployed to bring specialised knowledge, speed of response and enhanced value.
This hybrid model has the potential to benefit all parties in the supply chain and it will be interesting to see how it plays out, particularly as the electronics component industry learns to live in an ever more disrupted and rapidly changing world.
offshore-electronics.co.uk www.cieonline.co.uk
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