Semiconductor shortages will strengthen long-term supply chain


The semiconductor market has seen some pretty tumultuous developments over the past year and a half, with unprecedented customer demand and a supply chain unable to keep up for various reasons. As we move towards a more stable supply chain in 2022, which I think we’ll really start to see in the second half of next year, there are four main lessons I think we can all learn. Supply chain struggles around the world have been going through the past two years. I firmly believe that if we take these lessons to heart, they can strengthen the long-term supply chain and provide a stronger supply chain to deal with future complications.

Backup methods are essential

What suppliers have really learned during this crisis is how close they need to be to every element of their supply chain. Having backup plans for every item and not taking anything for granted has been key. And back-up plans should be as broad as a variety of shipping methods, from plane to ship to rail, and any combination of these three methods.

Additional inventory not a waste

Keeping some inventory is never a bad idea – you never know when and where supply chain disruptions might occur. Sadly, climate change will only get worse – we’ve seen more climate disruption in the past five years than we’ve seen in the past 20 years. Floods and fires have caused factories to shut down for long periods of time, and earthquakes and tornadoes have taken their toll. All of these shutdowns create major problems for an exit from the supply chain.

Automated Conveyor Systems at Digi-Key’s Distribution Facility in Thief River Falls MN.

And we’re seeing real change, with more and more companies adopting just-in-case strategies rather than just-in-time inventory models. While a full shift is not a model your business can fully embrace, having some backup inventory can be key to helping you in an emergency.

Digi-Key’s inventory model is more important than ever to keep the engineering community aware of the inventory we have. Today, Digi-Key offers 12.6 million parts from 2,000 suppliers, and since January 2021, we have added 500 new suppliers and 1.1 million parts. In addition to our core inventory, we also offer 1.1 million parts from over 850 vendors through the Digi-Key Marketplace, increasing the types of products we currently do not offer in our core business model. existing.

Flexible circuits will be the key

We’re already starting to see engineers designing more flexible BOMs that allow for more part substitution. For the engineering community to design more flexible circuits that allow the supply of three or four parts, instead of just one required component, will open up many bottlenecks and avoid them in the future. By designing with substitution possibilities in mind, engineers can take into account the interchangeability of items due to future inventory.

With flexible BOM management practice, designers can create a sub-level BOM for items they define as alternate options.

Global manufacturing

With the heavy reliance on the semiconductor supply chain based in Asia-Pacific countries, the ability to transport the product has been difficult. Getting products distributed around the world when the transport channels are blocked has been difficult to say the least. And as we start to see manufacturing expand a bit more around the world, it’s really important to understand where your suppliers’ foundries are located and if they have the capacity to manufacture products in different manufacturing facilities in as needed.

New technologies will support the strengthening

While everyone has struggled to stay afloat and cope with demand and supply chain constraints, many new technologies have also been implemented to address future supply chain issues. Digi-Key recently launched a new video series called “Supply Chain Transformed” that tracks the journey of components through the supply chain as they are integrated and integrated into monitoring and control systems. monitoring of new generation assets. Videos highlight the stops a product makes throughout its journey from design to production, including warehouses, manufacturing facilities, shipping, and more.

IoT sensors will be essential for tracking products throughout the supply chain in the future, causing monitoring and tracking to become smarter and better connected. Beyond smart sensors, emerging technologies include indoor positioning, robots and cobots, smart route optimization, and surveillance solutions to ensure the safety, security and reliability of workers’ products, such as temperature monitoring, condition-based monitoring and blockchain usage.

Struggles will repeat

We know that the semiconductor industry is feeling the boost due to various market elements including updated demand forecasts, consolidation of orders, price fluctuations and rationing. This pattern will repeat itself and therefore we must recognize that some of the same difficulties in the supply chain will repeat themselves as well. He’ll die for a while, but a boost always comes back at some point.

We can reduce the size of the boost by identifying backup methods, keeping an inventory handy, designing with flexible circuits, mapping every foundry you do business with, and deepening relationships with all of your partners. of the supply chain.

The past 18 months have shown us how important it is to have the right supply chain partner, and it has also opened up the market to allow more competition to come in and be part of the solution as well.


David Stein, vice president of global supplier management, Digi-Key Electronics.

David Stein is vice president of global supplier management at Digi-Key Electronics. Digi-Key is one of the world’s largest full-service distributors of electronic components.


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