The electronics supply channel, chain or pipeline – has usually always been talked about as something with a definite beginning and end. This model assumes a linear procession of activities, like a relay race. It is orderly, neat and easily comprehensible. But does it reflect the product flow in the electronics components industry?
According to the Electronic Components, Assemblies, & Materials Association (ECA), the real model looks more like a wheel, moving at varying speeds at different times, with intricate connectivity among different elements.
ECA is a Virginia, US-based proactive industry association that represents the electronics industry sector comprised of manufacturers and suppliers of electronic components and equipment. ECA president, Bob Willis, writes on its website that the transition between the chain, and what ECA calls the electronics flow wheel, has been happening for the last decade, but has only become obvious over the last two years, when ignoring industry interdependencies led to debacles in inventory and supply.
He quotes ECA past chair Glyndwr Smith who states that the traditional concept of a supply channel is dead - "the supply/demand equation can no longer be addressed as a serial progression. Instead there is an electronics flow, where each element interacts with and affects every other element. Collaboration by the organisations representing different industry segments is needed to create greater transparency and cooperation within the key elements of this wheel, which will benefit everyone in the industry."
Willis asserts that the new industry scenario provides two choices for industry sectors such as manufacturing, EMS and distribution: They can isolate themselves and participate only in their channel, chain or pipeline; or, they can work to understand what happens throughout the electronics flow wheel, define their roles, and cooperate with the other players to make sure there is not a replay of 2001.
Raw materials
According to ECA, the best place to start in understanding the electronics flow wheel is raw materials. ECA has long maintained that the industry has to recognise the role of raw material suppliers. Willis says that we should not be so arrogant as to believe that these suppliers will react automatically to industry demands. One has to look no further than two years ago when tantalum was in short supply and the flow wheel stopped and then backed up. At the same time, says Willis, stories began circulating about the source of various raw materials and a possible boycott of the very natural resources needed to develop them. It is not difficult to see what kind of effect this would have on the industry.
In the linear model, the start of the pipeline generally begins with the introduction of raw materials into the manufacturing process - the start of manufacturing marks the finish of raw materials. Yet, he says, all of the steps that could apply going forward in the manufacturing cycle probably apply going backward in the supply of raw materials. In the traditional model, many of these steps are never taken into account, creating another gap in the flow wheel. According to ECA, it is in a position to bridge this gap and include raw materials into the flow represented in the Produce segment of the wheel. Willis says that the ECA's membership already includes producers and suppliers of materials used in manufacture and maintenance of electronic components and assemblies.
The move to recycling
Recycling is an issue with which the electronics industry must come to grips. The process of design for re-use or disposal is often removed from the traditional concept of a supply chain, channel or pipeline according to Willis. Most programs focus on system-level recycling or disposal that has more impact for the OEM end product. Willis asserts that electronic components will soon need to be manufactured for recycle, which again points to a more circular product evolution than a linear one.
Creating flow transparency
Willis declares that there are three things that are important to electronics industry forecasting: communication, communication, communication. Participants in ECA's 'The Great Inventory Train Wreck of 2001' session, he says, were almost unanimous in their belief that communication amongst participants in the supply cycle could have tempered the steep decline experienced by the industry. "If only each party had provided information to the others, then most felt that moderation would have entered the equation and the mass oversupply could have been averted," he states. Also, much of the information being provided was not accurate or had been misinterpreted. Willis asserts that what was truly needed was the ability to interpret the information as a group, enabling each party to take the best decisions for their interests and thus the overall prosperity of the industry. Another problem, he says, is providing information in an easily usable form. Although organisations exist that collect, filter and disseminate information, Willis says there needs to be more cooperation among them, and ECA is thus working to make this happen formally in 2003.
Cooperation among existing organisations takes us a long way to better understanding information and putting it in context, but there is still a missing piece. No organisation yet exists to represent EMS or CEMs, according to Willis, and so ECA is moving to correct this situation by hosting a forum to address the issues within the EMS industry and thus provide a new level of transparency into the electronics flow wheel.
Collaboration a priority
In the linear model, participants are responsible for their segments of a channel, chain or pipeline. Standalone, this model serves its constituency. But, says Willis, it fails to provide the links necessary to create equilibrium outside of its sphere of influence. As a result, the supply and demand equations typically used to forecast electronic component movement have little impact on each other and shortages or oversupply occurs among different elements.
Willis claims that using the flow wheel approach, knowledge of the supply and demand within each element impacts the speed and direction of the entire system. He uses the analogy that just as car wheels can be made to rotate more efficiently or respond quicker to road changes, so can the electronics flow wheel. If a delay in one area of the wheel can be anticipated, then adjustments can be made and the situation can be moderated, keeping the industry on course.
ECA is already working with several organisations representing participants in the flow wheel. In addition to materials suppliers, ECA says it is working with NEDA and ERA to better understand the roles and responsibilities of the distribution sector. It is also working to develop a formal organisation to address EMS and CEMs.
ECA believes that its initiatives in 2003 will give every segment of the industry - materials suppliers, manufacturers, distributors, manufacturer's reps, OEMs and users - a much clearer picture of what is happening with the overall flow of supply and demand. Perhaps for the first time, says Willis, the electronic components industry will be able to quickly understand what is happening within its complex system of interdependent groups, and have the collective understanding to quickly adjust.
For information about ECA see www.ecaus.org
© Technews Publishing (Pty) Ltd | All Rights Reserved
printer friendly version