The electronic components industry seems to have left recent lead time woes behind, and hard-to-get parts are starting to be available in months rather than years — or in weeks rather than months. However, lengthening lead times are part of the ongoing cycle. It is important to plan now for lead time challenges that may crop up in the future. Fortunately, there are some tried and true strategies for minimizing the supply chain impact of these delays. 

Design with Lead Time in Mind

Planning to manage lead time challenges must start early in the new product design process. Coach engineers to consider availability and lead time risks for key components, and consider alternatives that might work if a device falls into end of life (EOL) or a long lead scenario. Then delay locking in component choices until later in the process. By creating two designs for a printed circuit board (PCB), for example, during early product planning, you’ll be able to evaluate which is best in terms of component availability and price when it’s time to put the product into production. A distribution partner can be a great resource in identifying problematic components and finding accessible alternatives.

Choose the Right Partners

A strong distribution partner can also help through vendor managed inventory (VMI) services. Your partner has purchasing power and connections to allow them to find in-demand parts more readily. Once a product prototype or bill of materials (BOM) is complete, it is prudent to source critical and hard-to-find parts early and keep them on hand. This strategy can be risky and a bit costly, so it’s best to reserve it only for critical parts. Stocking up avoids a scenario where a $1 part that is unavailable brings manufacturing to a grinding halt. It does happen —consider the automotive industry during the COVID-19 pandemic. Automakers found they had to shut down their manufacturing lines because they couldn’t get the semiconductors they needed to keep things up and running. By treating your distributor as an important sourcing partner, you can build a powerful collaboration. To do that, you’ll need to source parts strategically. By consolidating your buys with one or two key distribution partners, you have fewer relationships to mange and more pull with each partner. Focus on creating transparency and strong communication lines. Share sales forecasts and a detailed BOM often to help your partner understand what you’ll need. Create a plan for regular and recurring purchases so that your manufacturing facility receives a steady flow of parts. Whenever possible, qualify component alternatives so there is a backup if a crucial part becomes harder to find.

Leverage Inventory Planning

In the worst of the devices shortages, many used organized stockpiling components as a strategy. Stockpiling can be costly and leave an organization with unused parts unless it is done thoughtfully. Work with a distributor to create an arrangement to buy and hold long lead-time components for you. This is how it works:

• Set up an arrangement where your distributor will hold inventory of any component that has a lead time that is longer than normal (that’s a number of days you agree upon together).
• The distributor will provide a list of components that fit the predefined criteria and an estimate of total cost of goods.
• You issue a purchase order (PO) and promise to order the parts within an agreed-upon window (say 90 days after arrival) and pay for them. This safeguards your partner from tying up resources on unused parts.
• As the long-lead stock is used, the distributor replenishes it so it will be available when needed.

Of course, all the planning in the world won’t ensure that there’s never a situation where long lead time issues crop up. For critical components, you may have to pay a premium to get the parts you need. As tempting as it may be to turn to an unknown source for a hard-to-find part, it’s better to stick with tried and true relationships. Purchasing components from the gray market should be a last resort, and avoided whenever possible. These sources often can’t provide assurance that the product has been closely tracked and handled appropriately. In this scenario, the saying, “let the buyer beware” rings true.

When in Doubt, Turn to Waldom

Considering potential lead time issues early and often needs to be common practice for any sourcing organization, since device shortages and long-lead time challenges are inevitable. Communication is key. Designers need to communicate design decisions made through the lens of availability. Manufacturers need to build transparency and information sharing with distribution partners. By prioritizing these practices, the likelihood of lead time challenges shutting down manufacturing are substantially lessened.

Learn more about Waldom’s extensive breadth of inventory from over 50 manufacturing partners, helping our distributor partners mitigate the pain of long lead times on over 225,000 parts.