Shaving costs from the supply chain is the priority for almost one-third of respondents to SourceToday’s 2018 Distribution Study survey. But the results also suggest that more companies are focused on boosting supply chain transparency as new threats, such as widespread parts shortages and trade uncertainties, collide with more familiar concerns.
The study uses almost 1,100 responses from SourceToday and Electronic Design readers in procurement, engineering and executive roles. The results demonstrated what has remained the same about the electronics industry’s priorities: Roughly 31 percent said that they are focused primarily on trimming supply chain costs, down from 32 percent in 2017. The number of respondents focused on creating new supply and distribution relationships fell marginally from 20 to 19 percent.
But the number of respondents primarily trying to increase transparency and collaboration within the supply chain ramped up slightly to 17 percent, from 15 percent in 2017. The survey showed that this is the priority of one-fifth of procurement professionals, versus 16 percent for engineering staff and 18 percent for executive management – up from 18 percent, 14 percent and 16 percent from 2017, respectively.
The transparency push comes amid mounting challenges in the supply chain, including the growing threat of counterfeits and recent parts shortages that have created a feeding frenzy for inventory. Facing shortages of everything from capacitors to semiconductors, many companies are digging into the supply chain, putting in requests for the same part with several distributors and then cancelling one of the orders after getting it – also known as double booking.
The Trump administration could also create supply chain disturbances. On Tuesday, the White House said that it would proceed with its proposed 25-percent tariffs on $50 billion worth of Chinese products. The original list, compiled by the U.S. Trade Representative, included parts in short supply globally like transistors, batteries, diodes and capacitors. But a final list of affected products is supposed to be released on June 15.
Counterfeits remain the worst nightmare for the survey respondents. Over the last year, the share of respondents that pointed to counterfeits as either very important or somewhat important supply chain risks jumped from 72 to 81 percent. The executive branch was generally less concerned about counterfeits (73 percent) than those with engineering (81 percent) and procurement jobs (88 percent).
Running afoul of regulations is another major source of apprehension. In 2018, almost three-quarters of respondents pointed to environmental compliance as a serious supply chain concern, up from two-thirds in 2017. Last year, complying with import and export laws was at least somewhat important to 58 percent. But that percentage has grown to 64 percent as the United States continues to stoke fears of a trade war with China.
Conflict mineral disclosure rules are also causing hand-wringing in the electronics industry. These regulations are at least somewhat important to 49 percent of survey respondents, up from 44 percent over last year. But if American officials follow through on plans to repeal or weaken rules that require the disclosure of conflict mineral use – mainly tin, tungsten, tantalum and gold – that percentage could fall.
The survey showed that compliance concerns were proportional to how close the respondent was to purchasing. Four-fifths of procurement staffers said that environmental regulations were at least somewhat important to them, as opposed to 73 percent of electrical engineers and 61 percent of executives. Conflict mineral rules were flagged by 58 percent of those with procurement jobs, but only 45 percent in executive roles.
That heightened sensitivity may have something to do with the 22 percent of procurement professionals that are focused on adding new technology to their supply chain processes. Last year, that number was at 18 percent. Industry analysts agree that businesses could be better at using software to keep track of pricing, suppliers, as well as contract conditions and penalties, giving them a clearer view of their supply chains.