In the past two years, Murphy’s Law has all but replaced Moore’s Law as the defining dictum that characterizes the semiconductor industry. When it comes to supply chains, everything that could go wrong has indeed gone wrong.
Whether it be geopolitical tensions, line halts, natural resource shortages or unpredictable demand due to economic volatility, supply chains have taken damage at every turn. To ensure that your supply chain is both fortified and flexible enough to withstand the next disruption, here are the top five ways to reduce risk in your supply chain.
Forecasting is fundamental to reducing risk. When done effectively, it can reveal hidden market factors that may negatively affect your supply chain. These factors are often fluid, such as supply, demand, and geopolitical situations. Therefore, keeping a watchful eye on these variables is key.
By analyzing your company’s data around past supply, as well as a comprehensive map of your supply chain logistics, you can determine if one or more of your channels lie downstream from potential threats. Whether they’re economic or geographical, identifying vulnerabilities allows you to either pivot preemptively, or put contingencies in place.
Forecasting is just the first step in managing risk. The next is determining the proper course of action.
2. Buffer Stock
If you spot a potential risk to the supply of a critical component, purchasing buffer stock is a strategy that may be worth considering. Acquiring just one to two months of extra inventory can be a good way to brace for an incoming shortage.
However, this course of action is heavily contingent on the accuracy of your market forecasting. A misguided purchase of buffer stock could leave you with an excess, potentially forcing you to lower prices.
3. Obsolescence Management
Not all risks are unpredictable. Component obsolescence is an internal threat, making it a controllable risk that can be navigated smoothly with diligent monitoring.
Obsolescence management starts with keeping track of the end-of-life (EOL) notices and last-time-buy (LTB) dates for all components within your supply chain. Letting just one of these transitions fall through the cracks will lead to immediate shortages.
Once you’ve identified a component’s upcoming obsolescence, you can either find cross-compatible alternatives to plug-and-play, or look to R&D to accommodate plans for the next generation of parts from the manufacturer.
The more complex your supply chain is, the more vulnerable you are to obsolescence. Managing obsolescence well in advance is key to reducing internal risk.
4. Quality Control Process
Having a supply chain quality control process is imperative. Regardless of your industry, orders for electronic components should always be vetted. A lapse in quality can often require massive corrective action with direct impacts to your supply chain, such as scrapping inventory.
5. Supplier Relationships
Choosing the right supplier network to partner with is the most substantial step you can take in managing risk throughout your supply chain. A good supplier will often have offerings that extend far beyond supplying inventory.
Since they operate upstream from your main operations, where supply chain disruptions typically stem, a supplier can provide invaluable market insight that equips your forecasting. Moreover, finding one with a comprehensive quality control process will not only reduce risk, but also poses a more cost-efficient alternative to paying for in-house QC.
Partnerships with such a supplier should be seen as an investment that stands to pay dividends many times over to reduce risk in your supply chain in the short- and long-term.
Managing Risk Is an Ongoing Process
Risk management is a delicate balance of proactivity and reactivity. Documented processes and fail-safes are designed to keep you readily positioned to deal with most risks, but with threats appearing unexpectedly, being well informed on supply chain best practices equips you to handle surprises as effectively as possible.
Fusion Worldwide is the optimal partner to mitigate supply chain risk. We provide expert forecasting as well as inventory management, with five global warehouses equipped to house surplus and expedite orders. We are also the only independent distributor with in-house quality testing, to ensure lead times remain minimal.
If you would like to learn more about how Fusion Worldwide can help reduce risk in your supply chain, contact us here.