Shortages of natural resources and raw materials can make prices fluctuate substantially and even bring electronics manufacturing to a screeching halt. Proper planning is critical to staying ahead of the potential shortages.
Bindiya Vikal, CEO and founder of Resilinc, a provider of supply chain risk mapping and monitoring solutions, said:
Resilinc has been told by senior supply chain executives in high tech and automotive that they are closely monitoring natural resources and raw materials because shortages can quickly lead to extreme price fluctuations, directly leading to unplanned costs. These types of extreme price changes can have a direct impact to the bottom line.
She added that the raw materials on many people's watch list include silicone (used in wafer production); ceramics (much of which comes from China and is susceptible to regional geopolitical changes); precious metals (widely used in component manufacturing); and, surprisingly, helium (which has been on the edge of a shortage for several months and could be in periodic short supply this year).
“Raw material analysis at the commodity level is required, and most midsized companies don't have the resources to do all this work and keep a pulse on natural resource constraints,” Vikal said. “Analysis [and] early monitoring detection would help companies stay ahead of disasters.”
Some companies have already taken a proactive stand in identifying and managing possible natural resources risks and have linked them to business and supply chain sustainability initiatives.
At Johnson Controls Inc., for example, the company's biggest challenges are material acquisition, including materials containing natural resources, and minimizing risks while maximizing business opportunities within the supply chain, said Charles Harvey, the company's chief diversity officer and vice president of community affairs.
One way the company manages these challenges is by spelling out specific sustainability requirements in every supplier contract, he added. Along those lines, the company, which is a member of the CDP's Supply Chain Committee, mandates that its direct suppliers reduce their greenhouse gas emissions by one percent absolute annually.
Harvey told Velocity via email:
Johnson Controls sees less potential risk and more competitive advantage when [natural resources are] managed appropriately. Processes are also in place to verify contract compliance as well as recognize suppliers for outstanding sustainability performance that address such areas as human rights, diversity, environmental compliance, greenhouse gas emissions, water conservation, conflict minerals, and occupational health and safety.
Additionally, Johnson Controls has an elaborate risk management program that includes senior management and addresses a wide array of risks, including those associated with natural resources, Harvey said. The program cross-focuses on operational, insurance, regulatory, shareholder, litigation, capital, competitive, and reputational risks.
OEMs also play a big role in setting natural resources-related supply chain expectations. Nokia, for instance, has long been at the forefront of phasing out “substances of concern,” improving energy efficiency, and using renewable materials and smart packaging, according to Markus Terho, head of sustainability; the company regularly introduces new, more sustainable materials such as bio plastics, bio paints, recycled metals and recycled plastics into its devices, he added.
“Global demand for material resources will increase, while resources are becoming less available. This means that we need to manage our resources more effectively, find new ways of substituting materials and recycle and recover resources,” Terho told EBN in an email interview.
How is your organization monitoring and managing potential shortages of these natural resources? Let us know in the comments.