Agile answers for defence procurement

Charcroft Electronics director, Debbie Rowland, argues distribution must create new solutions to help defence OEMs achieve procurement stability

Purchasing professionals often deal with component allocation and long lead-times, but this time is different. Allocations are being caused by the global pandemic, while some component manufacturers are putting a block on new orders for allocated passives. Although primarily aimed at commercial parts, pressure is being felt across all sectors. Some component manufacturers are not accepting multi-source orders which OEMs and CEMs have previously used to increase the chance of delivery.

To ensure delivery of hard-to-source passives, customers would have placed the same order on multiple manufacturers or distributors. This could quadruple forecasts overnight and cause demand to fall just as quickly, as duplicate orders were cancelled after the first delivery.

We are now working under conditions imposed by a pandemic, so this is the time for distribution to create new procurement solutions as some passives lead-times have slipped from 12 to 36 or 46 weeks.

Alternatives have often been used to source passives on allocation or long lead-time but buying a similar passive from a different manufacturer is no longer a viable solution.  Identifying alternatives now needs a smarter approach. It is important for distributors to delve deeper into the customer’s project and the critical parameters for each component.

Engineers often specify passives at the high end of the performance spectrum. However, in the real-world application, the part may not need the specified ESR or tolerance. A passive with the same reliability, but lower specification, could provide a alternative.

As technologies evolve, perhaps the customer could use a stacked ceramic capacitor instead of single chip. Also, as manufacturers extend ranges, a resistor rated at 25ppm may now be available at 15 or 10ppm. Charcroft’s in-house manufacturing team could also modify the alternative or select two per cent tolerance parts from a batch of five per cent passives.

To offset price increases, the flexibility to hold buffer stock at a fixed-price for the next two years can provide procurement stability. Buffer stock could even be held on a 10-year contract with pricing fixed for up to

eight years.

Understanding the customer’s build schedule can even out the parabolic effect of ordering a year’s worth of components in one hit. The customer may only need 100 per month which the component manufacturer may be more able to deliver than an annual order of 1,200.

Distribution’s role will be crucial in helping defence manufacturers overcome shortages and allocation. It is important to talk to customers and to listen to their specific issues because one size definitely does not fit all.