As the Coronavirus wreaks economic turmoil around the world, modern supply chains face unprecedented stress and are drawing an increased level of scrutiny.
Today’s globalized supply chain network has been optimized to identify minimum lead times at the lowest possible price. We want electronics made in China, so we can buy them cheap.
However, rapid political developments, a shift towards consumers buying niche products and, now, global pandemics have revealed the weakness that lies at the heart of this model of manufacturing.
With the ever-changing supply chain challenges a trusted partner is more prevalent than ever. Many manufacturers are still suffering from the impact of 2020, and choosing the right partner to progress through 2021 will be critical.
Here are some of the most predominant factors affecting our supply chain currently;
COVID 19 AND ITS IMPACT ON THE LOCAL AND GLOBAL ECONOMY
- The vaccination has boosted optimism for a recovery in 2021. However, even if parts of the economy do recover to previous levels over the coming months, other segments and sectors may see their business models changed permanently. Navigating supply and demand planning in this uncertain environment will be a key challenge for businesses in 2021.
- The demand for WIFI & Bluetooth chips has rocketed with so many people now working from home. Unfortunately, we are facing major shortages of both commodities.
- Local shipping delays are commonplace due to the major increase in home deliveries and the growth in Amazon activity as well as substantially less air cargo channels. Parcels that are misplaced at depots are becoming very difficult to recover due to the immense backlogs.
- Sea freight experiencing major hold-ups at UK ports causing even further delays.
- COVID has had a severe impact on manufacturing and will continue to have an effect but expected to lessen in severity as we get into Q2 .
- Working hard to achieve everything for your loyal customer base is essential.
OUR FUTURE RELATIONSHIP WITH CHINA
- Perceptions have shifted on globalism and international trade. Over the next few years, we may see a fall in the reliance on China for general components and finished products, and a rise in its importance as an export market. Reshoring and the UK Manufacturing will be the way forward.
- China & USA trade war that has been ongoing throughout the Trump presidency is now taking a major effect in Global Supply, stock offers that were regularly being provided in the past are no longer shared.
- Another “China” effect is the surge in the Asian automotive industry due to COVID. Most middle-class commuters have stopped using public transport for fear of catching the virus and instead bought themselves their vehicles to commute.
- Increased delays at UK ports are causing wide supply chain challenges. Lead times are being pushed out as far as 30 weeks+.
- The lack of raw material/wafer is another cause of the lead-times soaring out. There are also constraints for raw materials, iron oxide is a concern today, with gold and other semiconductor substrate materials also rising.
- With fewer OCM’s providing manufacturing options, they will not be able to meet the spike in demand for 2021 after 3 quarters of decline from European OEM’s.
- NI manufacturing is at a geographical advantage for EU and UK markets.
- ‘Just In Case’ supply chain model is increasing, while many businesses are moving away from ‘Just In Time’. Our supply chains must be responsive and flexible to the fight the economic encounters and threats that are ahead in 2021.
A FOCUS ON SUSTAINABILITY
- Businesses are being challenged on all fronts to tackle practices that harm our environment.
- Consumers, activists and governments are influencing changes in sourcing strategies, carbon-emitting operations and the use of plastic materials in packaging. As a result, sustainability is becoming a competitive domain for all businesses.
INCREASING SIGNIFICANCE OF INEQUALITY
- Increasing levels of inequality will come under more scrutiny, which will be amplified by perceptions of the economic recovery from COVID-19.
- Supply chains that are built on cheap temporary labour, offshoring, and exploitative contracts will become targets for public and legislative examination.
These Macroeconomic trends will help you assess the key challenges that the next few months will bring and help prepare electronic manufacturers for the ever-changing marketplace we currently live in.
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