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Component shortages are as inevitable as death and taxes. They are also a major procurement risk. And the worst time to discover there’s a shortage is when you need a component, but can’t find an electronic parts supplier that has it in stock. That’s when the production line goes down. You’re losing money every day. You can’t deliver on time, and every company waiting on you is
impacted. Like the proverbial nail in the horseshoe, a shortage of a single critical part can create a cascade of delays. And if you work in a life-critical industry like health or defense, those delays can be genuinely harmful.
It can also be harmful to a company’s reputation. If a manufacturer repeatedly fails to deliver on time, they may struggle to win future contracts.
With COTS (Commercial Off The Shelf items), you are always at the mercy of the market. High demand and the fast pace of the technology market create a general instability that increases the risk of shortages, driving up prices and attracting counterfeiters.
That risk is highest in programs requiring long-term stability. If you manufacture something like commercial PCs, you’re constantly integrating the latest technology into your products, and rely heavily on constant change to drive demand. For these companies, component shortages will only cause short-term damage as they transition to newer and more available components.
Your situation is far more precarious if you have a government contract with a long lifecycle and testing requirements that will delay implementation for years.
There will always be component shortages, but there are ways to mitigate their impact. Predictive Tools – and their limits
For many engineers, the answer is predictive software that promises to keep them apprised of current stock levels and lead times and can indicate when a component reaches end of life. These tools are data-driven – pulling in reported stock levels, lead times, geopolitical metrics, and PCN notices to gauge the current state of the market for a component.
While these tools are helpful, purely data-driven solutions don’t always paint a complete picture. In part, this is due to the inherent flaw of data solutions – every choice of what data to track includes a choice of what data not to track, and those choices create holes that may contain a key data point. And no matter how much data you have, there are still quirks of real-world markets that simply cannot be captured in numbers.
These tools can tell you reported stock levels but may not recognize that a listed stock has already been assigned, or an umbrella company is listing the same stock through different
component distributors. They can tell you manufacturer-reported lead times, but not how well those reported times reflect the reality of the market.
Predictive software is genuinely useful in giving you a decent overview of the electronic components market, but it can also offer a false sense of security that may be snatched away when it’s time to order a part that is less available than predicted.
How Human Expertise Can Temper Procurement Risk
What’s missing in data-driven tools is human understanding. This is why it’s valuable to have someone widely experienced in sourcing components on your team to help deal with procurement risks. They will often recognize signs that the data isn’t telling a complete story, and they know where to go to find the missing pieces of the puzzle.
When you don’t have anyone on your team with the experience and expertise to look beyond the data, the easiest way to leverage human procurement expertise is by partnering with a Certified Independent Distributor.
These are people immersed in the challenges of sourcing hard to find components, so they are constantly monitoring the market in a way that goes beyond number crunching. They are experts whose years of experience lets them recognize patterns that don’t fit neatly into an algorithm.
The Step Beyond – RAS
At Secure Components, we kept seeing over and over again that predictive software failed to protect our customers from shortages, obsolescence, and other procurement risks. And while we could offer our experience and guidance, we realized that more was needed – a proactive combination of data and human intelligence dedicated to giving customers both more accurate
Information and solutions for their procurement needs.
Our solution is RAS (Resilient, Agile, and Secure) – a holistic program designed by procurement specialists to warn companies of shortages, giving them more realistic information on component availability. RAS is designed to measure procurement risk and offer solutions to assure on-time delivery at the best cost and in the safest way possible.
Like any predictive program, RAS uses a great deal of data and tracks many factors. We have developed proprietary ways to refine that data, such as vetting out repeat stock to get true stock levels.
But RAS’s greatest strength is its people – procurement specialists who have spent years sourcing components and are able to zero in on the places where reported data conflicts with actual human experience. When the numbers don’t make sense, they dig deeper to find out what’s really going on. As procurement risks rise for a component, our analysts watch the situation more intently.
Shortages will always be with us. And there are times – COVID was one – where no amount of preparation will be enough. But if you use every tool available to keep an eye out for shortages on the horizon, you’ll be better prepared for their arrival.
FAQ
How does procurement risk differentiate from obsolescence risk?
Obsolescence management focuses on the risk of a single possibility – that a manufacturer will stop making a component you need, and you will have to source it on the secondary market. Procurement risk refers to anything that may impact the availability of a component. This encompasses obsolescence as well as shifts in lead time, shifts in price, and snarls in the supply chain caused by shortages or delivery issues.
What is true stock?
True stock is a gauge of how much of a component is actually in stock, available, and deliverable within an acceptable time frame. True stock can be difficult to determine. Some stock may be double-listed in a way that is not obvious. And even reputable component search sites will sometimes list unusable vendors, such as those prohibited by the government.
Conclusion
Component shortages can wreak havoc with a manufacturer’s ability to deliver products. Handling procurement risk is crucial to prevent shutdowns and financial loss.
Shortages are very difficult to predict, and data without human analysis often misses important signs of an impending shortage.
Independent Distributors with years of procurement experience are best positioned to anticipate shortages.
Worried About Shortages? Check Out RAS – The Resilient, Agile, and Secure Answer to Procurement Risk
For years, we at Secure Components have seen customers continue to be hit by shortages, even when they’re using predictive tools. We wanted to help them, so we created RAS – an annual membership program designed to significantly lower procurement risk. RAS uses
proprietary procurement risk metrics and machine learning built on our years of experience to build probabilities. Our procurement experts can then measure actual procurement risk and offer solutions to assure on-time delivery in the most secure way at the lowest possible cost.
The goal of RAS is to offer a complete solution to ensure you have the components you need when you need them and keep costs reasonable.
We track true stock levels and timelines for each program’s BOM and check for potential obstructions to its sustainment schedules. When we see risks ahead, we can offer you options and solutions. In the event that your funding cycle doesn’t allow you to purchase components at risk of shortage, we can procure those components for you and hold them until your next cycle, saving you from the expense of a mad scramble to obtain components that are in very short supply.
RAS manages each program’s procurements through each customer’s approved component suppliers and vets additional suppliers when needed. And we ensure components are properly tested at a government-approved AS6171 test facility.
Contact us to learn more about RAS.
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