Quiksol Global’s president, Brian Ellison, describes how businesses can thrive in the ever-evolving world by staying informed, adapting to change and fostering strategic partnerships
As we move through 2024, the global supply chain continues to navigate a complex and ever-changing landscape. While there was initial optimism following 2023’s challenges, the market remains characterized by a sense of uncertainty as customers and suppliers adjust to the post-shortage environment.
Excess inventory looms in today’s market discussion as customers continue to strategically reduce higher-priced inventory through adjusted production schedules. While the reduction has slowed down orders into the distribution supply chain, some component manufacturers seem to be decreasing production. The good news is that end-user customer orders remain strong and aid in reducing market excess.
Shortage markets when supply and demand are out of balance naturally lead to higher material costs. Due to higher shortage market prices and component manufacturer announcements of increased costs in 2024, customer discussions are now leaning toward material cost reductions later in 2024. Pricing has come down in the open market in the past six months, but the broader opportunity will come when excess inventories flood the market as predicted in Q2/Q3 2024.
The transition market, driven by the abovementioned factors and lingering painful memories of the recent shortage market, continues to drive caution in 2024. Understandably, customers are hesitant to take on additional inventories without the assurance of mitigated supply disruptions in the future. This is where distribution can play a vital role by adding value to the customer’s supply chain by buffering active device inventories with demand over the next 12 months. This transparent partnership between customer and supplier can level the playing field against shortage/constrained markets through available inventory.
Industry experts are increasingly discussing the possibility of a ‘new normal’ for the supply chain, characterized by regular disruptions. This new normal is likely to be shaped by various factors, including:
Geopolitical conditions: Global tensions and political instability can disrupt supply chains by impacting trade routes, resource availability and manufacturing operations.
Emerging technologies: The rise of artificial intelligence and automation will reshape the supply chain landscape, requiring adaptation and investment in new technologies.
Automotive technology transitions: The ongoing transition to electric vehicles presents both opportunities and challenges for the supply chain as new components and materials are needed.
Consumer electronics demand: Evolving consumer preferences for higher functionality and shorter product lifecycles in the electronics sector will require agility and responsiveness from supply chain players.
Finding certainty in an uncertain world, from a supply chain perspective, will require creative new approaches and innovative thought leadership. Perhaps the best place to start is with strategic partnerships leveraging each other’s strengths, weaknesses, capabilities and value propositions grounded in transparency and mutual benefit.