Long lead times and shortages... again?
As the world begins dusting off its shoulders and starting fresh after the difficulties of the last two years, the supply chain is doing the same. With additional obstacles arising, such as war and natural disasters causing long lead time, shortages, and more, resilience and recovery are at the forefront of everyone’s minds.
With the future still uncertain, what is the industry doing to combat lead times and overall recovery? Read on to learn more!
Component Lead Time
Though efforts to solve some of the issues in the semiconductor industry are being pursued, lead time remains lengthy. Some industry leaders suggest that lead times for some parts could be as long as 18 months. At the earliest, the positive impact of manufacturers gaining more capacity will not take effect until next year. In addition to the lead times, prices continue to increase as well.
Now an expected consequence of the many hardships facing the industry, prices continue to rise due to the continuing war in Ukraine. We suggest that customers accurately count their needs to combat supply and demand. Ordering too little or too much causes bottleneck issues for others in the future.
Effects of Japan Earthquake
Many global events have the potential to impact the industry’s overall success. In the past, fires, floods, and other disasters have lengthened overall lead time and led to a domino effect of issues. On March 16, a 7.4 magnitude earthquake shook Japan’s cities, adding additional disruption to the supply chain. The damage from the earthquake forced Renesas to pause operations at all three of its plants based in the area.
Adding on to the pressure of the supply chain issues caused by the pandemic, the earthquake threatens the automotive industry’s continued success. All three plants are responsible for creating semiconductors needed for automotive production. Most importantly, no employees experienced significant injuries during the earthquake.
Supply Chain Recovery
Supply shortages partnered with increased demand have created the industry’s perfect storm. Though full recovery is not in the near future, some parts of the supply chain are seeing improvements. This is particularly true for aggregate inventories. The automotive industry continues to bear the brunt of supply chain woes.
In addition, the hardships felt by the auto industry have negatively impacted other businesses as well. For example, automakers reduced their ad spending because of the lack of inventory. The decision reduced business for many ad companies, and though many predict this will correct itself sometime this year, it still has impacted business success.
There’s no denying that the supply chain has faced severe challenges over the last two years. From lockdowns to natural disasters and war, obstacles continue to loom. Despite this, the industry has also proved its resilience and innovation.
Processes are changing, industry leaders are taking hold of the reins, and partnerships are being strengthened. At Velocity, we know it takes a dedication to quality, flexibility, and relationships to continue to thrive in a market like this.