Black Swans of 2011 Reshaping Supply Chains

On the heels of several 2011 natural disasters, the electronics industry has been met with new pressures as it continues to work towards stabilization.

As we have been seeing, the first quarter of 2012 brought the supply chain closer to "normalcy." Unfortunately, forecasting is never precise and lean inventory stressors will continue due to the global macro-economic uncertainty, adding new levels of complication for the supply chain to overcome. Now it is time for the industry to look back and reassess market exposures, developing new ways to hedge risk going forward.

Lasting impacts from the 2011 bottlenecks call for better pro-activity and responsive strategies. Sole- or limited-sourcing left many supply chains without the requisite parts to meet delivery or demand. OEMs are forced to revisit the viability of sole-sourcing as nearly all had to work aggressively with qualified alternative partners to keep production lines moving.

Consolidation of many manufacturing facilities within or across manufacturers is ongoing, requiring existing facilities in other regional locations to expand capacity or divest to accommodate. This reaction has forced revisions to retool previously profitable strategies for regional logistics and inventory management.

This year, we expect to see an increase in diversified sourcing solutions by OEMs, moving the EMS sector to expand the number of regional facilities to reduce risk in the event of geographically-centered disasters. Vetted, quality, global sourcing partners are critical to this new diversification model.

We also believe that risk management of inventory and assets has been highlighted throughout the industry. Add to the existing challenges the problematic, global macro-economic situation still plaguing the mature economies, plus the present transitions to new architectures and wafers, it is of little wonder that OEMs and the EMS sector are shifting their manufacturing and sourcing strategies.

Two areas of particular importance in this setting are the day-to-day component costs and effective return on end-of-life assets. Smith & Associates has a long-standing history of customer-focused, dedicated services to mediate the volatility of our industry. Two of our services are directly designed to help global OEMs and EMS companies best manage inventory and assets, from purchase through disposition, PPV Plus, and our asset disposition services.

Maximizing our global market positions through scale and agility, Smith is able to help companies consolidate and reduce vendors without sacrificing flexibility and while buffering customers from the risks of traditional sole- or limited-sourcing. With a leading and trusted partner, updating critical supply chain strategies has never been easier, or safer.