Future-Proofing Your PCB Supply Chain

Predictions by industry experts warn that electronic component supply chain disruptions will likely last into 2024. While every industry experiences supply chain issues, shortages have drastically impacted those involved in the production of electronics. 

Despite responding to the increased demands for semiconductor production by building new foundries and increasing production, chipmakers are still challenged by the need to produce new specialized parts for burgeoning technologies like the IoT while simultaneously needing to increase production on legacy components. And demand isn’t expected to slow down. According to Future Market Insights (FMI), the PCB market is poised to grow at a CAGR of 5.1% and reach US$ 104.8 Billion by 2033.

To assist you in mitigating your supply risks during these turbulent times, below we’ve outlined the best practices that will help you future-proof your PCB supply chain, including:

• Starting at the source, designing for resilience
• Implementing a diverse, strategic multi-vendor sourcing process
• Preparing for long lead times and higher prices
• Establishing a robust supplier vetting and selection

Designing for Resilience

In preparation for rapidly changing production requirements and product availability, it’s critical to start future-proofing your supply chain during the design phase. Historically it was common practice to design with no consideration given to the BOM requirements or a viable sourcing strategy. But now more than ever, product requirements and availability can quickly change. Add to this the specialized chips required for more advanced designs with no direct replacements, and Just-In-Time (JIT) practices suddenly become a risky venture.

To ensure scalability and minimize the need for redesigns, sourcing and supply chain strategies must begin to take root early in the design phase, accounting for inventory status and the likelihood of future supply issues, inventory shortages, or obsolescence.

To future-proof your supply chain, safeguard your production continuity, and minimize the need for design changes, consider enhancing your processes with the following:

• Plan out variants and build in agility by selecting critical components that maximize your options during production.
• Understanding component life cycles and longevity
• Checking availability and price prior to finalizing BOMs 
• Increasing flexibility by searching for drop-in replacements and designing for multiple parts, providing alternative options in case of a supply issue.
• Simplifying your BOM will help you minimize your vulnerability points, reducing the potential for supply issues by reducing the number of parts required.
• Planning for longer than average lead times and price increases by establishing a clear procurement process that can handle quickly changing lead times and price fluctuations (by increasing safety stocks, placing orders earlier than normal, or with multiple vendors, for instance).
• Prioritizing the procuring of parts based on risk factors. Lower-risk components can wait to be sourced near the end of the project. But high-risk components should be finalized and procured as soon as possible, building supplier relationships and ensuring scalability from the “get-go.”

A design is only as good as its production feasibility. Although they tack on some time to the front end of the design process, the above steps are critical in ensuring that once a design is finalized, manufacturing at the volume required will be possible and unobstructed by supply issues. In the end, this saves on time and costs and secures a solid, more resilient go-to-market strategy.

Have a Strategic Multi-Vendor Sourcing Process

Relying on a single source constrains you to the price and schedule of one supplier. To make the best design choices, you must have access to the best options. By strategically diversifying and aligning with partners who have an extensive network of long-term partnerships with manufacturers, brokers, and distributors, you can build a more agile supply chain that enables you to respond more quickly to changes in supply or demand and optimize your production efficiencies and the lifecycle of your PCBs.

Source Local When Possible

Although offshore sourcing has its benefits, local onshore electronic manufacturers can offer a host of benefits offshore counterparts cannot while reducing your risks.

It stands to reason that the longer the supply chain—and the more international borders your goods must cross— the more opportunity for risks of all kinds, whether it be financial, operational, service, or brand risk.

• Political and civil unrest
• Duties and tariffs
• Currency volatility
• Logistical bottlenecks
• Quality and Compliance
• Theft and corruption

Above is just a small selection of areas of heightened risk associated with offshore sourcing that threatens your profits, introduce delays, and can bring harm to your brand reputation. Offshore sourcing can bring additional complications, such as language barriers, time differences, and mismatched national holidays.

Comparatively, local electronics manufacturers can offer real-time, same-time service, reduced exposure to counterfeit parts, and higher standards (avoid unscrupulous manufacturers that fail to meet regulatory compliance and quality requirements). A local partner is also more likely to know your business better, take a longer-term view of your partnership and understand your product needs, making for a true, mutually beneficial, and successful partnership.

The Shift from Cost to Value: Creating a Robust Supplier Vetting and Selection Process

A robust supplier vetting and selection process is your first line of defense. You want to ensure to work with knowledgeable partners who have extensive experience in the electronics industry and understand the complexities of the electronic component supply chain.

Due to the significant price increases that have been seen in the market—73% of parts saw price increases in the third quarter of 2022—benchmarking price and lead time prior to selecting a vendor is now common practice as buyers look to capture the best deal for their dollars. However, the need for flexibility and continuity of business demands a more robust supplier vetting process that prioritizes vendors who can clearly demonstrate value—both in terms of cost and service—including robust demand, risk, and supply chain management infrastructure.

Although the technology sector has always considered cost a—if not the—most critical purchasing decision criterion, today, “value” incorporates availability and stability of supply.

• Factor in a broader range of factors beyond price when evaluating and selecting vendors
• Vet potential vendors for capabilities, quality and supply chain control, risk management, financial strength, and their ability to consistently provide on-time delivery
• Check customer references for your short list of vendors under strong consideration.
• Don’t forget to consider all costs and deliverables that would fall within the vendor contract.

Evaluate the 10 Cs

A well-respected system for the final vetting of prospective suppliers is Carter’s 10 Cs of Supplier Evaluation. Carter’s 10 Cs, which you’ll find listed below, will help you thoroughly evaluate potential suppliers based on what most matters to your business. Together, these factors can help you deliver reliability and value for cost.

Rather than a simple pass or fail, evaluating suppliers on all 10Cs using a weighted decision matrix, you can gain a deeper understanding of the supplier’s suitability and align your supplier selections with your corporate objectives and values.

Note you may need to interview contacts and clients for each vendor to gather the necessary information to evaluate some of these points. Also, remember to pay attention to any areas the supplier rates weak on and decide whether it’s a deal breaker or something that can be improved upon with time.

1. Competency: How well they have demonstrated their competency by satisfying other clients.
2. Capacity: What are their existing commitments, and do they have the capacity available to handle your required volumes?
3. Commitment: This should include their commitment to quality, reliable service, and sustainability, as well as their commitment to standards of quality such as ISO or Six Sigma. 
4. Control: Robust supply chain management processes indicate they have control over their supply chain and will be able to deliver reliably, quickly adapting to the unforeseen, and delivering as committed.
5. Cash: A company’s financial strength, including positive cash flow and liquidity, will allow them to stay in business through financially difficult times. 
6. Cost: When benchmark pricing, remember it’s total value you’re looking for. Saving on the cost of a product only to receive poor quality, unreliable service, or worse yet, nothing at all, can bring great harm to your brand and your profits.
7. Consistency: The degree to which they follow standard processes to consistently meet demand and deliver the right item, in the right quality, at the right time, and at the right price. 
8. Culture: The company culture and organizational values of the supplier, which should align with your non-negotiables (quality, service, sustainability, etc.) and benefit your long-term relationship.
9. Clean: The commitment to environmentally-friendly practices and ongoing sustainability improvements, including the fair treatment of their own employees and business partners and the acceptance of responsibility for their end-to-end supply chains.
10. Communication: Their day-to-day communication, as well as how they communicate in times of crisis and their general initiative to best manage your overall business needs.

Once each potential candidate has been scored and ranked from highest to lowest, the top three are then carefully considered for final selection.

Although the worst of the impacts of COVID-19 may be behind us, there’s just no saying when the next supply chain disaster will strike. As Wayne Gretsky famously said, you want to skate to where the puck is going. Risk management isn’t about protecting yourself from the past but from whatever the next big disaster may be. 

For 2023 and beyond, strengthening your supply chain management can act as a critical differentiator, allowing you to develop the process, systems, and structures you need to enable resilience in the face of disruptions and stand above the rest.

Although each organization has different levels of process and technology maturity and its own unique market stance, all can benefit from partnering with the right suppliers and leveraging their capabilities to accelerate growth and future-proof their supply chains.