Front End | Electronic Components Supply Network … and ‘Billings’


The ‘Billings’ performance (the blue bars in the graphic) saw reasonably steady growth in the twelve months from Q4’20 to Q4’21 as OEMs increased their in-house inventory levels in a bid to ensure they have full kits of components ready for assembly. Sounds logical doesn’t it, but although they might have as much as 99.8 per cent of the bill- of-materials they need in-stock and ready to go, the remaining 0.02 per cent probably won’t be, and availability of these devices tends to change on a daily basis. When the delinquent parts are eventually delivered the kit can go straight into production, but the company’s overall inventory remains elevated as the next kit is short of components, albeit different ones. The graphic reveals declining growth in ‘Billings’ in Q2’22 when compared to the previous quarter.


‘Backlog’


Unfortunately, the graphic doesn’t specifically show ‘Backlog’ (outstanding orders) data but contrasting the orange and blue bars in the graphic that span the eighteen months between Q4’20 and Q2’22 reveals that - on average – it remains way higher than what


is regarded as ‘normal’ or as is recorded in IDEA’s archives.


Looking forward


As they are designed to do OEMs’ ERP systems will adjust in-house safety and general inventory levels to reflect market changes without too much human intervention. However, buyers in the global electronic components supply network will need to closely monitor current risk factors that include; fear of economic recession, inflation, exchange rate fluctuations, the cost and potential shortages of energy & raw materials and elevated geopolitical tensions, and that’s before they factor in continuing disruptions to international and last mile logistics. OEM buyers can be forgiven for needing a much higher level of confidence in the ability of their suppliers to 100 per cent meet their bill-of-materials requirements and deliver on-time. That said, I’ve no doubt that the highly competitive nature of the electronic components market will maintain overall market stability, but I fear that the first half of 2023 will see the return of an oversupply situation for a short period as the pendulum of supply and demand swings beyond equilibrium.


I suggest that the appropriate customer response to an improving supply situation in uncertain times is to gently “roll back on the throttle” and in collaboration with their supply network partners allow their orderbooks to come back into balance in a controlled way. Organisations “applying the brakes” or making abrupt changes in their purchasing procedures will inevitably expose themselves and their network partners to increased supply risks.


For information


Adam Fletcher is chairman of the International Distribution of Electronics Association (IDEA), an association of individual country electronic components associations whose objective is to arrive at and share best industry practice. He also chairs the Electronic Components Supply Network (ecsn), a UK business association that was established in 1970 and today offers support to all organisations with an interest in electronics technology.


“…Promoting Positive Collaboration Throughout the Electronic Components Supply Network to Benefit Members and the Economy…”


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Components in Electronics


October 2022 13


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