What’s behind the rising cost of power supplies?

Sager Electronics explains how long-term planning, good communication and partnerships with authorized distributors help when sourcing power supplies.

Sager Electronics’ director of supplier marketing for power products, Paul Kopp

AC/DC and DC/DC power supplies are complex and typically have hundreds of components on a BoM. Given their intricacies, sourcing power supplies has always had a degree of complexity but the current environment has made it more challenging. Three key factors have impacted the power supply market: lead times, transportation and pricing/inflation.

Pre-pandemic, standard manufacturing lead times for power supplies were typically 8 to 12-weeks. In the pandemic’s early days, demand and production slowed and manufacturing lead times moderately increased to 15 to 20-weeks. At that time, customers and distributors operated on a just-in-time (JIT) basis, with customers ordering based on lead time or less, and distributors managing inventory based on customer forecasts. As the pandemic dragged on, material and production employee shortages continued to strain capacity and lead times jumped to 24, then 36-weeks and are now averaging >60-weeks. JIT is now a thing of the past, and while power supply manufacturers face ongoing difficulties finding critical components, pent-up customer demand has overwhelmed the supply chain.

Transportation lead times correlate with component lead times. Shortages in staff, changes in policy, rising fuel costs and other issues have impacted transportation time and costs. For example, transporting a product from Southeast Asia to Long Beach, California would typically take four to six-weeks via ocean freight. Now, that has extended to >16-weeks in some cases. Pre-pandemic, it was fairly easy to authorize air shipments. Now, the cost of doing so has tripled and quadrupled. Power supplies can be heavy, large and bulky. With weight, size and price, it’s a challenge to expedite freight shipments without paying a hefty price.

Trends including parts shortages, material costs, transportation, robust consumer spending, wages and uncertainty have sent prices through the roof. With inflation at a 40-year high and supply chains that can’t catch a break, these issues are taking a toll. With most power supplies manufactured in China, customers are also dealing with tariffs. Geographic diversification is helping, but it takes time.

It is hard to predict the next six to twelve-months but Shanghai, Guangzhou and other vital manufacturing areas are still experiencing rolling lockdowns and forced closures. Regarding transportation and logistics, the International Longshore and Warehouse Union contract is set to expire on June 1, 2022. A short or long-term strike at the west coast ports would cause extreme disruptions.

What will likely happen first is transportation challenges will improve, fostering improvement in other areas, and over time, supply and demand fluctuations will smooth out.

What can buyers do to minimize the impact until then? Update lead times in purchasing systems and source longest lead time items first as power supply orders are already being placed for 2023 and 2024. Partner with an authorized distributor like Sager Electronics, which is receiving containers of power supplies weekly and has a technical sales team to help source in-stock power supplies. Sager can manage forecast and support bonded inventory for power supplies and other critical long lead time items.