ELECTRICAL & ELECTRONICS
EFFECTIVE PLANNING STRATEGY
REO UK
WHY IS THERE AN ELECTRONIC
COMPONENT SHORTAGE?
Since the launch of the Model
3, Elon Musk has been under
significant pressure to scale up
Tesla’s manufacturing capacity and
overcome its current struggle with
meeting demand. Currently, the
electronic component supply chain is
trying to tackle a similar challenge, as
Steve Hughes, managing director of
specialist components manufacturer
REO UK, explains.
The need for electronic components is
growing exponentially. In conjunction
with our greater use of handheld
devices and their relatively short
product lifecycles, there is increased
use of electronics in industries that did
not traditionally use them. The rapid
evolution of the automotive industry
and internet of things (IoT) are two
key factors that have resulted in a
stronger-than-expected demand for
components, which manufacturers
are finding difficult to keep pace with.
Like most modern electronic products,
automotive systems use multi-layer
ceramic capacitators (MLCCs) and
traditional combustion engine cars
can require approximately 3,000
capacitors, but as cars move from
hardware driven machines to software
driven machines, their infotainment,
driver assistance and comfort systems
require more even more components.
For example, the requirements for
display systems, LED lighting, sensors
and artificial intelligence (AI) features
have all contributed to the inflation of
components required by this market.
As a result, forecasts suggest that the
number of MLCCs could rise to 22000,
in just one car in the near future.
To add to this, annual production of
Electrical Vehicles (EVs) is expected
86
PECM Issue 35
to reach 2.4 million units in 2021,
compared to 409,000 in 2014. This
substantial rise has been driven
by new emissions regulations and
incentives from governments and it
doesn’t appear to be slowing down
any time soon.
Similarly, IoT devices were nothing
but a figment of the imagination 30
years ago, but smart devices are now
adding a further burden to an already
constrained market. In fact, forecasts
show that IoT devices are set to grow
to almost 31 billion worldwide and
this alone has raised concerns among
many manufacturers.
As explained, nearly every industry
uses electronic components and we
are finding that many customers are
double-ordering components and
panic-buying to try and eliminate
further production delays along the
line. However, this does not provide a
suitable long-term solution.
Instead, at REO UK, we are urging
businesses to implement a more
effective planning strategy and
flexible ordering system for their
projects, which can strongly protect
against any unexpected supply chain
issues, such as the current shortage.
As it stands, analysts’ predictions
are varied, but it’s expected that the
shortage will continue into the early
months of 2020 at the very least and
so businesses need to set realistic
expectations and regularly update
their customers to retain good
relations. This has been the approach
taken by Tesla, which even now is still
trying to boost its production output
and still generating orders.
This is not the first time there has
been long delays for key components
in industry and we expect that this
will not be the last, especially as
buying behaviour and purchase
decisions can be so unpredictable.
By implementing a procedure
that allows for longer lead times,
managers will be able to better
manage operations to respond
effectively to fluctuating lead times in
the future.
www.reo.co.uk