Front End | Electronic Components Supply Network
Minimising supply network disruption…for want of a nail
In the geopolitical and macroeconomic turbulence that currently prevails, system-integration companies (customers) are facing unprecedented disruption in their upstream supply networks and are struggling to fulfil 100 per cent of the orders on their books. Failure to supply customers on time results in reputational damage, lost business opportunities and increased costs. In this article Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), shares his thoughts on how all organisations should be collaborating with their supply network partners and their customers to mitigate supply disruption for all parties
A
ll the indications are that the hostilities between the US and Iran will continue longer than anticipated. Even when some
peace is agreed it will inevitably take many months to reorganise energy supplies and logistics, and possibly years to repair the damaged energy infrastructure. The US administration believes its country’s energy self-sufficiency will shield it from the supply shortages resulting from its actions, naively overlooking the many related products critical to the country’s economy that will also become scarce. A similar problem has been playing out due to Russia’s invasion of Ukraine. This war is now in its fifth year, and the situation is getting to be critical, particularly regarding energy supplies, as Russia is increasingly targeting Ukraine’s power generation capability.
It’s not just the lack of crude or refined oil products and natural gas that is impacting the electronics industry and the global economy, but also the loss of all the 1000s of critical derivative products (plastics, chemicals, lubricants, specialised gasses) etc. The European Union obtains the energy (oil, gas and electricity) it needs from a multiplicity of sources but will increasingly be impacted by the diminishing availability of energy supplies from middle eastern producers. Africa, Asia and India are already facing massive economic disruption because of their reliance on shipments of OPEC energy, and China’s huge stockpiles of oil must also be rapidly diminishing.
12 May 2026
Where are the pain points in the electronics industry?
The pain points for the electronics industry vary depending on where an organisation sits in the global supply network, what it is that its customers demand and how adept it is at leveraging the support of its supply network partners when trying to navigate its way through the multitude of evolving problems. Manufacturers of electronic components are primarily concerned with the availability of raw materials, their manufacturing capacity and the capability of their logistics infrastructure. The greatest pain point however is how best to utilise their scarce manufacturing capacity to maximise profitable production, whilst meeting their customers’ demands. Manufacturers rely on the support of their customers and their authorised distributors to forecast their market demand for the products to be produced reasonably accurately. Knowing what to make is key! Get that right and it’s great but the lack of reliable forecasting can dramatically impact supply, upset customers and hit profits.
Authorised distributors serve many thousands of customers, generally with products from a range of complementary component manufacturers. They typically hold well over one million Stock Keeping Units (SKUs) of different individual component types, geographically dispersed across their multiple warehouses. In the absence of accurate forecasts from customers authorised distributors are compelled to determine which components to carry in inventory using a combination
Components in Electronics
of existing customer order backlogs, past purchase history, and the skills of their multiple product managers and inventory analysts. Getting their “inventory profile” wrong dramatically increases stock holding costs while an inability to ship causes a total revenue loss. That’s before you factor in the upset customer and the additional cost of expedited inventory and priority logistics when attempting to recover a late delivery situation.
UK customers’ perspective UK based system integrators (customers) manage multiple Bills of Materials (BOM) for the sub-assemblies their end-product needs, but these typically amount to fewer than 50,000 SKUs. Their end product is almost certainly manufactured in economical batches the size of which may vary according to the particular sub- assemblies being manufactured, whilst maximising utilisation of production equipment and test capacity. Failure at any point in their electronic-components supply network will initially disrupt manufacture of one or more sub-assemblies, but if the disruption is sustained it can affect overall output and cause significant revenue loss.
Inventory classification Most organisations in the supply network classify their inventory into three classes based on annual consumption value, determined primarily by – despite what IT folks may tell you – the simple 80/20 Pareto analysis technique: components that account for 80 per cent of the total
value-times-quantity are “A”-class items, the next 20 per cent are “B”-class, and the remainder are “C”-class. No surprise then that customers’ procurement teams consistently focus their activity on the 10,000 “A” -class items and the 8,000 “B” -class to ensure supply and minimise inventory holding. The remaining 32,000 “C” -class components tend not to be monitored as carefully because they are purchased in appropriate bulk volumes due to their low inventory value. In theory at least, there will always be ample in-house inventory of “C” -class components and supply problems should never arise. Customers’ master production schedulers would be well advised to run regular ERP simulations of their likely future production schedules to test the resilience of their pipelined inventory. Whilst never perfectly replicating reality, these processes quickly highlight potential inventory issues and enable timely corrective action to be taken before it’s too late.
A fun comparison
The procurement department of a typical systems integrator must closely manage 18,000 “A” -class items whilst product managers at a typical manufacturer authorised distributor have to closely manage 540,000 “A” -class items. An altogether different scale of headache in the supply network!
For want of a nail
Once one gets to grip with the scale of the issues surrounding inventory control
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