In 1995, Thinkway Toys introduced a 12-inch-tall “Buzz Lightyear” action figure to capitalize on the release of the movie, “Toy Story.” The movie was a huge success—so much so that it soon became apparent that Thinkaway Toys hadn’t produced enough of the action figures to match demand. What resulted is what most consumers would describe as insanity—long lines, high prices, angry adults, and disappointed children.
As luck would have it, I had picked up one of these Buzz Lightyear toys for my son on a whim one day when I was at the store. This was before the craze had really started, and I didn’t realize until later that I was actually one of the fortunate few to have bought one of these toys. I was the hero, and my son was the envy of all his friends. More than 20 years later, it is still an amusing story to reminisce about at family get-togethers.
What is not fun, however, is seeing a similar, yet far more serious, version of this scenario playing out in today’s electronics industry. Unfortunately, it is true—we are dealing with a very troubling electronics component shortage crisis. This crisis is wreaking havoc with PCB manufacturing schedules and costs due to excessive lead times and escalating component prices. Partnering with a CM that provides materials management and engineering services can help shield you from these struggles.
The Electronic Component Shortage Problem
If you’ve worked in the industry for any amount of time, you’re likely familiar with the electronic component shortage problem. While it can be traced back to several factors, the issue can be summarized with the same age-old story that affected the Buzz Lightyear toys: the supply of electronic components is low while their demand has increased.
One of the reasons for this crisis is the need for new parts to support the demand for new technology. To counter this, component manufacturers are, in some instances, switching their production lines away from their standard parts to manufacture the newer parts that are in high demand. Although this helps provide the newer components, it limits the supply of the more standard parts, extending their lead times and driving up prices.
As a result, PCB designers are finding that some of the standard parts that they are used to having at their fingertips are now more difficult to get, and they are having to change their designs to accommodate part availability.
A recent issue of Design 007 magazine has explored the problem as well as relaying different stories from PCB designers who have been affected. Designers are reporting extended lead times for components that are usually readily available while prices on those same parts have shot through the roof.
How an Effective CM Can Help
Here is where your contract manufacturer can help—by having their finger on the pulse of the industry while they are producing your assemblies. Not all CMs are equipped for this level of service. Instead of staying ahead of component shortages by effectively managing their inventories, they will dismissively tell their customers that; “Oh no, the part’s gone.” This may get them off the hook, but it ends up leaving the customer scrambling to find their own solution.
In contrast, an effective CM will help you overcome the adverse effects of the electronic component shortage by doing the following:
- Stocking up on critical parts. Your CM will stock up on critical parts that have longer lead times so that the production runs of your boards are not affected by component shortages.
- Maintaining relationships. Because they are in a position to order parts for all of their customers, your CM will have developed strong relationships with component manufacturers, ensuring that they will get the best lead prices and shortest lead times.
- Carrying inventory for future builds. Additionally, an effective CM will have the capacity to purchase parts ahead and carry excess component inventory, knowing that you will be returning to them for additional builds in the future.
- Providing engineering and materials management expertise. Finally, a truly effective CM will work with you on your design before it goes into production. Through their review of your design, they will be able to spot possible component shortage problems and recommend alternate or replacement parts prior to production. In this way, your projects will be able to avoid future part shortages well in advance.
What’s the Benefit to You?
Developing a trusted relationship with a contract manufacturer is a critical part of creating your electronic designs. Not only will they be able to help get you through this current electronic component shortage, but they can provide many other services that will help ensure that the electronic assemblies that you design will be built the way you intended.
At VSE, we’ve established relationships with component vendors so that parts you need for your designs will be available and cost-effective when building your next project. We take the risks of carrying inventory so that your projects will not be left stranded for parts. In addition, our engineering staff will work with you to resolve any component-related problems that might cause delays.