Sourcing alternative components during supply chain disruptions

Newark’s global head of technical marketing, Cliff Ortmeyer

Newark’s global head of technical marketing, Cliff Ortmeyer, shows how comparing components with expertise can solve product shortages.

Shortages in electronic components continue to be a critical concern for purchasing professionals. Even as the pandemic is winding down, disruptions to the global supply chain linger, creating long lead times, price increases and availability crises for many electronic product manufacturers.

At the same time, growth in new applications like artificial intelligence, automotive, 5G and IoT are intensifying competition for these commodities. No one can accurately predict when component inventories will recover to meet demand.

To become more resilient, manufacturers need to move away from single-sourced components and open their product designs to enable sourcing of compatible products. While second-sourcing more active parts like semiconductors may be a challenge, there are many second and third-tier suppliers producing more standard passive components like resistors, capacitors, switches, diodes and transistors that could be widely used across product designs. The key for purchasing professionals is understanding how to do effective product comparisons.

It starts by finding a sourcing resource with whom the customer can build a relationship and who has the knowledge to steer them towards alternative solutions. Tech support within these organizations should comprise engineering teams designed specifically to have extensive knowledge of a broad variety of electronic components. There should be specialists on the team who are trained in specific product areas and possess a deeper understanding of the technological nuances of a product.

Buyers should also focus more on commodity parts, which are more easily second sourced. These could span from anti-static bags, connectors or cable ties to higher end resistors and capacitors. A lot of these products can easily be sourced from a new supplier provided the specs and performance ratings are better or equal to the unavailable product.

If purchasing professionals need alternative sources for more active parts, their options will be more limited. However, some active/semiconductor components have become more commoditized—like certain diodes and transistors—offering buyers an easy alternative. Finding alternatives for higher end, purpose-built active components will require buyers working with their design engineers to find and vet workable replacements.

Again, it is important to utilize the knowledge and expertise of the supplier’s team. It’s not good business sense to have highly paid design engineers spending their time researching new components. Instead, purchasing professionals should collaboratively research alongside their suppliers’ experts to identify potential alternatives and bring those parts back to the design engineers once all the necessary information is compiled.

Another option is to consider private label products like Multicomp Pro. Some distributors have launched private label collections of affordable components to help offset product shortages and make it easier for buyers to find high value alternatives. For example, Newark offers more than 60,000 carefully selected components from leading global brands, giving buyers access to quality products with significant cost savings.

Of course, affordability may not always be possible when seeking an alternatively sourced component in today’s precarious global supply chain. Global inflation combined with Covid variants and geopolitical conflicts have made component manufacturing 20 to 30 per cent more expensive, according to recent Bloomberg research. In these cases, purchasing professionals can only do their best to find the lowest cost solution that meets performance specs and manufacturers will have to adjust inventory costs accordingly. It is almost always less expensive to incorporate a more expensive component than redesign a circuit board around cheaper parts.

Some desperate product manufacturers have even purchased boards that contain a high-value component they need for their solution and disassemble it to utilize the part.

When purchasers are forced to find foreign alternatives to components they’ve come to rely on, they need to ensure the components originate from an authorized distributor. Otherwise, they won’t know what they’ll be getting quality-wise. The supply chain is rife with counterfeit products disguised within popular branded labels. Having an entire product fail due to a defective counterfeit part is a costly embarrassment. Authorized distributors provide the paper trail and certainty that the product purchased is genuine.

Reputable distributors can also function as a manufacturer’s supply chain arm, rather than pre-purchasing and stocking components themselves. Distributors can manage the entire procurement process, handle all inventory and find alternative components when needed. Their knowledge, expertise and capacity can save purchasing professionals a lot of time and trouble.

Lastly, buyers should consider taking advantage of on-premise stockroom solutions from distributors. They can help buyers manage inventory and order fulfillment by placing component ‘stores’ on site for on-demand needs. Installing custom stockroom solutions can lower manufacturers’ inventory levels, reduce their vendor base and consolidate their spend, while broadening access to potential second-sourced parts.