Navigating Supply Chain Disruptions: Semiconductors

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7 Methods to Handle Severe Material Shortages

How Did We Get Here?

  • Automobile Electrification – Automobile manufacturers have rapidly increased the use of electronics as they continue to expand into EV product lines and introduce more sensors, which ultimately make cars “smarter” through options such as automated breaking, limited hands-free driving and lane-keep assistance with lane departure warnings. While cars currently average 1,400 chips per vehicle, EV’s with a full complement of “smart” options can have 5 to 6 times more chips than their fossil fuel counterparts.
  • Consumer Devices– As Work-From-Home (WFH) increased during the pandemic, so too did the demand for home office equipment, including desktops, laptops, printers and all of the associated hardware necessary to remain productive while working remotely.
  • Digital Infrastructure – As WFH continues, the demand for reliable telecommunications, including bandwidth, must keep pace. In addition, companies, both large and small, are increasing their digital footprint as they expand the gathering, processing, and storing of data. All of these factors create an environment of accelerated demand for the electronic components required to support this expansion.

Federal’s Approach to Supply Chain Variability and Uncertainty

  • Daily Material Requirements Planning (MRP) – Running our MRP on a nightly basis ensures that the latest material demand data based upon customer priorities are captured and acted upon within 24 hours. Changes in demand (new orders and reschedules) for over 65% of planned parts are communicated to suppliers within 24 hours though the use of a supplier portal.
  • Daily Production Scheduling – Resetting production schedules every evening based upon the current state of material availability, work cell labor allocation and utilization, and customer prioritization ensures we’re building the right complement of products at the right time.
  • Driving To Need – Historically MRP systems would drive material to the longest lead time component and adjust as availability improved. To support demand requirements, Federal Electronics drives to our customers’ need dates and works proactively with them to address shortages that impact our ability to deliver to that need.
  • Identifying Alternate Components – Federal Electronics utilizes software that compares electrical/physical parameters, suggests alternate components (especially semiconductors) based on the degree of similarity, and identifies current stock availability.
  • Non-Franchised Sources – While our first choice is to use franchised distributors, when all franchised sources have been exhausted, some customers approve the use of brokers. In those instances, Federal Electronics has a documented, methodical process based upon AS6081 “Counterfeit Electronic Parts” with strict adherence to compliance requirements such as component testing when chain of custody is not available to broaden our sourcing options.
  • Increasing The Demand Horizon – Obtaining longer demand horizons from our customers, coupled with an increase in our internal planning window, allows Federal Electronics to provide maximum visibility to the supply chain to help mitigate the impact of increasing lead times.
  • Increasing The Supply Horizon – Placing orders well in advance of lead time, throughout the entire demand horizon regardless of lead time by expanding the planning window.

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