Product innovation remains incredibly important in today’s New Normal, but more than half (53%) of electronics industry product launches have been delayed or cancelled due to the Coronavirus disease (COVID-19) pandemic, according to a new Dimensional Research study commissioned by Supplyframe.
The “2020 Trends in Electronics Sourcing” report indicates that COVID-19 also has led to increased component costs, the need for electronics companies to rework their products and the inability to fill customer orders. That is especially problematic now, in a challenging economy that has increased the importance of driving new business revenue and protecting margins.
The vast majority (91%) of electronics companies surveyed said sourcing issues are the cause of product launch delays. An even greater share (95%) of the survey group agreed that the path to solving component sourcing issues requires integration of engineering, sourcing and partners. This points to the importance of de-risking design as early as possible in the design cycle.
“New product introduction (NPI) is never easy, but the shortages experienced during the coronavirus pandemic have created a new set of challenges for manufacturers across the globe,” says Steve Flagg, CEO and founder of Supplyframe. “This experience puts greater emphasis on the importance of building resilient supply chains. That starts in the product design phase with a connected NPI process – enabling effective collaboration across sourcing, engineering and manufacturing and injecting prescriptive intelligence into the process at every decision point.”
The Coronavirus impacts everyone--the electronics industry is no exception
The study highlights the broad effects of the COVID-19 pandemic. In addition to the product launch impacts, 37% of electronics companies surveyed said their overall component costs have increased. The same share said they are unable to fill customer orders. Nearly as many (35%) said they need to rework products to replace components that are no longer available.
Slightly less than one-third (31%) said they are now onboarding new suppliers without going through approved vendor processes – increasing their risk. A fifth (20%) said they have an unusually high number of mistakes due to team members’ stress and distraction. Nearly as many (17%) said they have been forced to select lower-quality component options.
Lack of collaboration between engineering and sourcing contributes to the pain
COVID-19 is just one contributing factor to these challenges. Other prevalent factors include the long-standing global supply chain complexity, inadequate enterprise systems, and the lack of collaboration between internal engineering and sourcing teams during new product design.
The lack of collaboration between engineering and sourcing during the NPI process can add to electronics companies’ costs, lead to delays, and set up electronics companies for greater risks. It can also put the jobs and reputations of engineering and sourcing professionals in jeopardy.
Seventy-nine percent of the survey group said that collaboration issues have caused product introduction delays, which slows time to revenue. Sixty-two percent of this group said this happens occasionally, and close to a fifth (17%) of them said it occurs frequently. Meanwhile, 85% of the total survey group said engineers select components that can’t be effectively sourced, which could be a symptom of the lack of collaboration. That often leads to greater costs for electronics companies – a whopping 81% of the survey group said they have been forced to make expensive spot buys because of component availability issues.
Sourcing compliant components is another industry pain point, as 93% of the survey group said that compliance negatively impacts sourcing processes. Sixty-two percent said selection of non-compliant parts requires rework. The research indicates that compliance concerns often slow component selection (61%) and negatively impact component availability (34%).
Existing systems don’t address core needs
While many businesses have enterprise systems in place, more than three-fourths (77%) of them said their enterprise resource planning (ERP) and product lifecycle management (PLM) systems are not fit for the needs of electronic component sourcing.
And, 89% said they have challenges with existing applications used for sourcing electronics components. Of this group:
· 39% said new product component selection frequently requires bill of material (BOM) cleaning and revisions
· 36% said workflows bring sourcing teams in too late to effectively influence design decisions
· 35% said existing sourcing technologies are inflexible and unable to respond to unplanned events like hurricanes and pandemics
These archaic solutions also lack cost optimization capabilities from which electronics companies could benefit. Indeed, 81% of those surveyed said their sourcing applications prevent them selecting optimal cost options – with more than half (54%) running into this problem occasionally and nearly a third (28%) dealing with this challenge on a frequent basis.
Businesses can gain more control and predictability with advanced sourcing technology
“Uncertainty and complexity are constants in business today. But, electronics companies have more control of managing their risk than they may realize,” says Flagg. “Risk does not exist solely in post-product release endeavors. Eighty percent of the lifetime risk and cost of a typical hardware product is decided during that product’s design process. Companies need to examine what’s happening in the design phase because that’s where the disconnect often exists.”
When engineering teams design products without input from procurement and sourcing teams, they may overlook better component options, potential cost savings, and other factors that could lead to improved business outcomes. But when engineering, procurement and sourcing teams collaborate – and have access to market intelligence about real-time inventory availability, cost and changes – they can de-risk as they design. Indeed, 99% of the survey group reported direct benefits from early collaboration between engineering and sourcing teams.
The “2020 Trends in Electronics Sourcing” study is based on an online survey of 217 decision-makers responsible for sourcing electronic components at OEM companies with 500 or more employees.