Sometimes it can take a shortage of something to make a business realise how much it can rely on that thing; a ‘don’t know what you’ve got till it’s gone’ sort of situation. That is very much the case when it comes to semiconductors and the current global shortage. These components are in virtually every digital device we use, and the shortage can and will affect most people.
Many industries have and continue to suffer due to this shortage, not least the automotive industry. Automotive is an industry that has only recently become a more technology-dependent sector when compared with other industries, and made up 10% of the semiconductor industry. As a result of this they lack the close relationships some other companies have with the suppliers of semiconductors. While automakers know how important semiconductors are, they had no way of predicting a global shortage. This has left them in a difficult situation that no one in any industry could have foreseen.
As with many other supply chain issues, shortages, and general difficulties businesses have faced in the last year or so, COVID-19 has played a significant part. Automotive industries halted their orders of semiconductor chips (and many other electronic components) to curb spending in line with the reduced orders. The issue was that other companies bought semiconductors and didn’t cancel their orders. The result being that once car sales surged again when much of Europe and the USA were approaching the end of the worst months of the pandemic, said car makers and other automotive companies were at the bottom of the list in the market suffering from a huge supply/demand imbalance.
So, how best to deal with this shortage? There are no easy ways to rectify such an imbalance, and it certainly makes things difficult, yet there are ways to survive this shortage. We have put together three tips to potentially help survive the current semiconductor chip shortage the world is experiencing.
#1. Design for Availability
Supply chain shocks are nothing new, and have only been exacerbated by more than two years of the pandemic. The semiconductor market has always been a cyclical industry, and therefore designing for availability is a known solution. When sales are being lost as a result of a shortage of a component, leading companies redesign, eliminating (as much as possible) the need for whatever component is in short supply.
Although not always possible, the removal of non-essential features that require the unavailable semiconductor chips can help alleviate the pressure. Similarly, a reduction of customisation that depends upon a surplus of specific elements, as well as a hold on cresting new products that rely on semiconductors or other parts in severe shortage.
While such a drastic redesign is no mean feat, the mark of a successful company is one that is able to adapt and, using a cross-functional team, quickly and efficiently achieve the goals and deliver on the project. Once this current ‘supply shock’ has waned, companies will keep these teams together, continuously working out ways to redeploy products while adding value, should disruption hit once again.
#2. Leveraging AI
The supply/demand imbalance is likely to continue for some time, due in part to the difficulty, high cost, and time required to reset the equilibrium. Billions of dollars and time (usually three to five years) are needed to set up a new semiconductor plant. AI, however, can be utilised to speed up this process.
By applying AI, the semiconductor industry can be hugely accelerated. AI can increase the R&D process through the mitigation of defects, poor processes and unnecessary hold-ups. Similarly, AI can aid significantly with risk assessment. Manufacturers can spot upcoming trends in the market, reducing risk posed by unforeseen shifts affecting performance, allowing them in turn to optimise the opportunities that exist.
Through algorithms and a better combination of power and performance, the utilisation of AI can really change the path to regaining the supply/demand equilibrium. The supply chain can be streamlined and more efficient, mapping the value chain and predicting risks and offering analytics that can help improve even further going forward, while conserving both costs and resources.
#3. Reliable Logistics
Finding a reliable and trustworthy logistics partner plays a huge part in keeping supply chains moving. As previously mentioned, it can be true that the pandemic-inspired pause on many sectors’ ordering of semiconductor chips damaged the relationship between provider and ordering company, while logistics companies’ links to providers remained strong.
The disruptions in semiconductor chip supply have been tough, but there have also been significant constraints on global travel, and therefore freight. Shortages of shipping containers (due to high demand and fewer ships sailing) has resulted in a preference for air freight. The air freight space has, in turn, experienced a higher demand than they can easily manage. This can be attributed to a variety of factors, such as less aeroplanes flying and the essential transportation of COVID 19 vaccines around the world. The drop in passenger travel likewise means there are fewer passenger planes available to carry freight. Global air cargo for 2021 and the first quarter of 2022 is 25% less than in 2020.
Partnering with a reliable and well-respected Time Critical logistics provider with experience and global reach can make the tough job of acquiring necessary parts easier. Logistics companies who have strong relationships with airlines they use regularly can help to keep your company’s supply chain running. These strong, long-term relationships with Time Critical companies benefit not only the airlines and the logistics company, but also the companies who partner with them.
The logistics provider your company chooses to partner with is a vitally important choice. It is essential to join forces with a company with experience, global reach and a reputation you know you can trust. One such company is Royale International. With 25+ years’ experience and an unparalleled reputation as a global logistics provider, they are an obvious choice. They offer a substantial range of logistic service options, and have experience across a variety of different sectors, from automotive electrical companies and beyond. Royale International also have significant experience in Time Critical services. Time Critical services’ importance cannot be underestimated, however. In situations such as the current global shortage, Time Critical logistics serve as a safety net – a mechanism to help alleviate some of the difficulties experienced by not only aerospace and automotive businesses, but by semiconductor businesses too.
To find out more about Royale International’s services and how they can help your company, click here: https://www.royaleinternational.com/services/time-critical-services/