Scoping an engineering project can be challenging during the best of times. In recent years, supply chain volatility has made it even more difficult for electrical engineers and project managers to execute efficiently.
A recent study conducted by ECIA found that more than 90% of projects have been negatively impacted by global supply chain disruptions. Of all the supply chain challenges facing engineering teams, staying on schedule and on budget were the two most pressing matters.
With the continued strain on the supply chain, companies have been forced to either delay projects until they can get the parts they need or source other materials from a different supplier, often at a higher price point.
While preventing all delays and changes to an engineering project is impossible, companies can better navigate today’s current market by understanding and planning for the challenges facing supply chains.
While many challenges remain for the global supply chain, five key issues impact electrical engineers and companies the most. These disruption areas include:
● Labor shortages
● Rising costs
● Energy supply shortages
● Volatile economic environment
● Unstable geopolitical landscape
As with many industries, labor shortages have taken a toll on the global supply chain. This impacts vital roles, from mining to processing to manufacturing to shipping. And once in port or enroute, truck drivers, logistic coordinators, and warehouse workers have seen a sharp decline in the number of employees willing to work. With the lack of staff in these critical areas, it’s taking longer for companies to receive key raw materials and/or finished products. One bright spot is that we’ve seen significant reductions in port congestion, a major issue last year.
Electrical engineers and project managers also feel the strain of labor shortages within their organizations. In the recent ECIA survey, mid-level and senior electrical engineers ranked “Not enough engineers on staff” as the third most pressing challenge out of 16 issues.
Inflation has impacted energy, food, raw materials, transportation, building supplies, labor, and virtually every sector of the economy, worldwide. The good news for certain electronic components, such as circular connectors, is that key raw material costs have declined in 2022. However, according to The Bishop Report, overall costs will continue to rise in 2023 due to increased labor wage increases, growing consumer demand, and manufacturing overhead costs driven by sustained inflation.
As mentioned above, along with raw material and supply chain disruptions, many companies are also experiencing shortages in key energy resources, including natural gas. One of the main reasons for the recent energy crisis is the reduced natural gas supply leaving Russia. With the limited energy supply, many European companies are significantly cutting back on production forecasts.
Organizations based in the United States are also starting to scale back on output forecasts for 2023 as global partners are finding it difficult to keep up with demand due to the energy supply shortages.
A significant increase in the cost of living and a volatile economic climate has resulted in up and down consumer spending cycles. With the volatility in consumer spending, it is becoming more difficult for supply chain planners to accurately forecast the number of raw materials needed for the upcoming quarters.
Likewise, B2B and industrial manufacturers face unpredictable and shifting economic headwinds that make planning, sourcing, and securing critical components difficult.
Without the ability to predict demand, many businesses are playing it safe and, as a result, running out of certain materials needed to make key products. Or they are over ordering and carrying too much stock putting pressure on facility storage and cash-flow. Unfortunately, with the strained supply chain, it’s continuing to be a challenge to replenish components promptly.
As companies move into 2023, two conflicts are significantly causing disruptions in global supply chain operations — the Ukraine/Russia War and growing tension between the United States and China.
The war in Ukraine has impacted the global food and energy supply chains. Many countries rely on the grain output that comes from Ukraine, and unfortunately, since the battle between the two countries began, few ships have left with the key food products.
Similarly, the tensions between the United States and China have also put a strain on the global supply chain. In fact, the recent conflicts in the Taiwan Strait have created significant issues for one of the world’s busiest shipping ports.
With the current supply chain disruptions affecting thousands of companies worldwide, tightening your current operations is essential. The following four supply chain strategies will better position your organization to handle the ever-changing global environment.
With the expected ongoing supply chain issues and inflationary pressures, having the right partner will be vital in navigating the ever-changing landscape. Working with a full-service who represents multiple manufacturers will provide personalized expertise and offer more options and flexibility than a transactional focused provider.
Price increases are expected in 2023. How many, how often and how much are unclear. Authorized electronic distributors are closest to the market and have a finger on the pulse of the electronic component supply chain. A distributor partner, working closely with their manufacturers and customers, can assist in anticipating and mitigating the impact of price increases through pre-buys and stocking programs to pre-buy appropriate stock levels at lower cost.
Even though your business may already have a stocking program for essential components and raw materials, it’s important to keep a close eye on your entire list of project items. With the current supply chain challenges, you may find that certain supplies continue to be difficult to obtain in 2023.
A well-developed stocking program will make it easier to estimate the quantities of supplies, order appropriately and keep a reliable flow of critical components to meet project deadlines.
Another way to prepare for the ongoing supply chain disruptions is to identify and form partnerships with suppliers that offer equivalent alternatives for key materials and parts. Equivalent materials and items that can easily be tested and validated will make it possible to keep projects on track and within budget without sacrificing the desired performance characteristics.
As an authorized distributor of circular electronic connectors for more than 45 years, ElectroShield has a team of experts who learn your needs and work as an extension of your team. We can help you anticipate and address supply chain challenges by: