After two years of unparalleled business uncertainty, there’s finally a hint of blue skies ahead and wise technology start-ups are already putting out the feelers to ensure that a weak supply chain won’t hamper their businesses’ rapid growth. Supply chain isn’t their core expertise though, and distributors need to help to ensure that they can get their products into the hands of customers quickly, in line with their business plan.
Technology start-ups with an innovative, market-leading and possibly life-saving product on the drawing board, need to focus on the detail of testing and tweaking the product so that it delivers the functionality its prospective customers are seeking. But in the adrenalin rush of product development, it’s easy to forget that getting the right components is not just about the technical specification: it’s also about making sure parts can be delivered in the right time frame for the product to be launched into the market and delivered.
The supply chain environment for start-ups
The current global economic and political situation is having a dramatic impact on the supply chain for electronic components. Pent-up demand coupled with scarce raw materials means manufacturers are seeing significant increases in prices. At the same time, freight charges are increasing globally, and delivery times are extending even when the stock is in the warehouse. And there is no end in sight to this uncertainty. For start-ups this issue is particularly acute, as they may not be at the top of the list for urgent deliveries when the long-awaited components finally become available. What if there are two or three components that are crucial to their device but also essential to devices made by much larger players?
This climate is presenting a unique challenge for technology start-ups, and many small entrepreneurial ventures may not have the necessary expert knowledge to work through the supply chain problems which are, in my experience, unprecedented. There is a popular misconception that because devices for 50 prototype and field trial units -production were sourced without difficulty, then mass production of 50,000 can be managed also. Quite often, start-ups have little or no supply chain expertise. It is written in their business plan as an outsourced function: ‘somebody else’s problem’. But when they end up with a one year plus hiatus where their EMS provider simply cannot source a 50,000 build for a brand-new product in line with the planned launch date it becomes very much their problem. Worse still, the build cost projections created one or two years ago can be completely out the window by the time the components required do appear.
As things stand, I don’t see the position on lead times improving until well into 2023. Customers whose design is six months away from being released on the market need to start placing production orders for the bill of materials as soon as possible. Of course, the investment risk when placing firm orders for components to fulfil demand that is hard to forecast and in any case is at least six months away is considerable. Although there is a huge demand for new technology in the medical, communications, security and low-carbon sectors (such as electric vehicles), few new businesses can afford to take on such commitments when future orders are uncertain, no matter how much faith they have in their new product.
Design for supply
We’ve been talking to our customers about ‘design for supply.’ A little thought can make the difference between a product that can get built and shipped and one that can’t – sometimes because just one or two parts on the BoM can’t be sourced. There is a powerful case right now for reviewing the design of products with this issue in mind. Several discrete parts can sometimes be consolidated into one integrated device, giving purchasing fewer part numbers to procure. Is there a way of integrating that ‘patch’ that was applied to rectify an issue into the main design?
We are also recommending that customers consolidate their design to as few manufacturers as possible. Some vendors are favouring customers who source many parts from them – seeing them as somehow more valuable or loyal. Sometimes there is no alternative. There is only one supplier for a particular device, and that supplier offers nothing else that can be applied to the design. But where there are several sources, and the differences in terms of price and/or performance are marginal and not critical to the design, it is better to consolidate in the current environment.
The ‘technology adviser’
‘Design for supply’ may well feel like one issue too many to consider alongside design for manufacturing, design for test, design for recycling and plain old design to create a product that fulfils the brief within the SWAP and cost envelope. However, there is help available. Anglia has always provided extensive technical support for customers – but start-ups also need logistical support and supply chain know-how. Anglia’s dedicated division for start-up customers, Anglia Unicorn, provides both and can help mitigate these issues. For example, they will help in specifying modifications to the BoM based on what can be sourced more readily, identifying early on ‘risk’ items, or amplifying the customers voice and negotiating future demand requirements on their behalf directly with suppliers ahead of launch date requirements. Effectively, to start-ups, it is a ‘technology adviser’ sitting alongside their legal and financial advice teams.
In working with start-up customers, the Anglia Unicorn team is backed by Anglia’s considerable expertise in watching the market to identify emerging trends and help manufacturers of all sizes to keep up with ever-shifting supply chain priorities. This expertise is accessible to customers through Anglia Live. It is also backed by Anglia’s exceptionally strong inventory position. As a privately owned business, Anglia maintains high levels of inventory as a proportion to the size of its business, and where key customers including start-ups have particular needs then its holdings of critical devices can be increased. To address COVID and the current supply chain uncertainty, Anglia has ramped up its inventory further to support customers.
The current market
As things stand, I don’t see the position on lead times improving until well into 2023. Customers whose design is six months away from being released on the market need to start placing production orders for the bill of materials as soon as possible. Of course, the investment risk when placing firm orders for components to fulfil demand that is hard to forecast and in any case is at least six months away is considerable. There is no doubt that the supply chain can make or break a start-up, but that’s not where their expertise lies. The technology start-up’s job is to design and deliver great products, often turning their market upside down. Distributors like Anglia have a major role to play in ensuring that their inspiration isn’t strangled early by inward supply chain issues. Working together in this way enables everyone to prosper.
