Electronics Production | December 23, 2010

The invisible 'World War'

Historically great demand has caused chaotic struggle to secure components, affecting EMS, PCB and OEM alike.
"It has been a tough struggle about capacity. We are trying to get the manufactures to speak. Right now we are actually in the middle of a tough negotiation with a manufacturer. We are fighting hard and focused on getting the volumes required", Benny Holst explains who is Supply Chain Director in BB Electronics and "front-soldier" in a highly up-to-date, but also invisible global "war" about the important components to the electronics industry. Benny Holst is right now in China with the object to secure BB Electronics the required deliveries. No holds are barred in the fight for components.

"It has been very chaotic. I have been in the business for 17 years and I have never witnessed anything similar. We have experienced allocation situations before. However, we have never before seen anything similar to this. The entire system is run down. Formerly, everything was handled automatically. Today we must manually handle the same order up to 3, 4 or 5 times per day. The customers are pushing for delivery and we contact the manufactures. The day does not have enough hours for all the things that we need to take care of", Poul Andersen explains who is Country Manager at EBV, which is a distribution company buying electronic products from the manufactures and selling them to BB Electronics among others.

Poul Andersen's task is to control the progress of the situation from EBV's Danish head office in Aarhus. Right now he is witnessing a global supply market acting crazy. The situation leaves companies as BB Electronics with great and very specific challenges as regards both production and end customers.

"There is great uncertainty about which components are available in the market and how fast we can get them. It has massive consequences if we suddenly operate with component lead times of 200 days instead of 20 days. This information will perhaps first come to our knowledge when we order the material. Then suddenly we are 180 days behind compared to the customer's demand and it does not help having 99 out of 100 components", CSO & Vice President in BB Electronics Jan Ellegaard explains and continues explaining that in several cases the problems related to the imbalance in supply and demand result in increasing component prices.

The situation has made BB Electronics react in relation to the suppliers.

"The best we can do is to keep our suppliers informed as good as possible about our demands. We are in contact with more than 300 suppliers once a week. By routine we are now receiving information about changed lead times. After all, it is better to know the exact lead time in order to act according to it. At the same time many employees are involved in the close cooperation with the suppliers to secure the required components. By doing this we work hard to secure the supply to our customers. If we had not done anything the situation would have been much worse. In most cases we receive the materials, but not always in the required quantities. However, after all it is better for the customers to know that the component expected on 1 January cannot be delivered until 1 February due to lack of components. This makes them capable of acting accordingly", Jan Ellegaard explains.

He believes that this bottleneck is actually prolonging the global financial recession.

"The demand for end products exists. However, the longer time it takes to get up to speed again on component availability the longer it takes for the crisis to end. This is the consequence when orders are lost all the way through the supply chain", Jan Ellegaard analyses.

In China, where Supply Chain Director Benny Holst is staying at the moment, the first signs of improvement are perhaps beginning to show. "There are still several factories from which we experience great challenges as regard receiving answers at all. Lead times are still very long all over, however more stable than formerly. For some manufactures we are seeing a slight improvement", the "front-soldier" explains with moderate optimism.

Source: BB Electronics
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