Building A Better Supply Chain: 5 Trends To Watch In 2022

//php echo do_shortcode(‘[responsivevoice_button voice=”US English Male” buttontext=”Listen to Post”]’) ?>

CUPERTINO, Calif. — Sept. 6, 2042 — Apple Inc. today released its first 3D-printing kit for its flagship iPhone products. Complete with printer, materials, a SIM card, and a printed-circuit board, the kit allows users to assemble their iPhone on demand and customize size, color, screen type, and other features. The kit retails for $3,500.

take that, supply chain. Apple has circumvented you.

Partially.

There are two sides to every supply chain: inputs, or the components and materials required to build a product; and output—finished products in the hands of the end user. In recent years, inputs — such as semiconductors — have become a real problem.

For the above concept to work, Apple would need a tight grip on its inputs. But 3D printing could alleviate several supply chain headaches, including spare parts. If consumers had the ability to build and repair a smartphone on demand, they likely would.

Still, electronics companies are so interdependent that dispensing with the supply chain would put many out of business. In the post Covid-19 era, efforts are underway to improve supply networks. Several of them directly impact engineers — and all are worth watching in 2022.

1. 3D printing

Historically, 3D printing has made its mark in the earliest design phases of a product and in supporting maintenance and repair in the aftermarket. Now, all signs are pointing to the technology stepping up to print parts to support manufacturing and smooth out supply chain gaps even in demanding vertical markets.

“In 2022, we expect the impact of 3D printing to continue building across a range of large industries,” said Wayne Davey, global head of Go-to-Market for HP’s 3D Printing Solutions organization. “We’re already seeing this trend take hold in industries including automotive, consumer, health care, and industrial. 3D printing has advanced to deliver design freedom and significant time, economic, and supply chain benefits for a wide variety of parts.”

“With distributed manufacturing, manufacturers can produce parts just in time, close to the time of need, and near where it is used,” said Alessio Lorusso, CEO of Roboze. “Not only does this help reduce emissions, but it also helps organizations reduce cost of inventory and shipping time.”
The largest 3D-printed product, to date, is a 25-foot boat hull.

2. The ‘x’ factor

Design for Excellence (Design for X, or DfX) isn’t new. Manufacturers can design products with cost, sustainability, or other factors in mind. But Design for Supply Chain (DfSC) is catching on as component shortages limit industrial production. Automotive companies lost an estimated $210 billion in 2021 due to a lack of chips. DfSC prioritizes components that are readily available, have multiple vendors, are easily swapped, and are even manufactured onshore.

Practitioners admit this is a hard sell to engineers who are accustomed to selecting components for their designs. There’s always been tension between OEMs’ procurement and design departments because purchasing must cost-effectively source the components an engineer specifies in a design.

“We’ve deployed DfSC for our next-generation products,” said Mike Fitzgerald, VP for operations at Pure Storage, a data-storage-as-a-service provider. “There’s no single sourcing unless the part selection is technology-driven. Let’s say we use an Intel CPU, but if a second source becomes available, we try to design those products in. We’re scaling out that model and making sure we don’t rely on any one vendor.”

Design for Printing could become a thing.

3. Digitization

Digital transformation is hard to define because each business is unique; therefore, the needs of a digital transformation are different, according to Siemens. In simple terms, digitizing a supply chain means partners are using and sharing data to inform forecasting, inventory, logistics, and a host of other decisions. The goal is end-to-end visibility of a product or service from concept to delivery.

Historically, electronics companies consider forecasts, production schedules, inventory levels, and similar data as competitive information. But the chip shortage and endless supply disruptions could prompt businesses to rethink their strategies. Businesses that serve multiple customers, such as distributors or EMS providers, have customer-centric firewalls in place. With digitization, input from component suppliers — such as production schedules — can be matched to customers’ demand forecasts.
Forecasting doesn’t have a good record in the electronics industry.

Digitization also provides new toolsets for the supply chain, such as AI and digital twins. In factories, the internet of things provides autonomous condition monitoring for critical equipment plus machine-to-machine communication throughout a facility. Today, that includes robots performing operations, configurable material handling equipment, and automated inspection stations. Defects can be spotted early in the production process and quickly corrected.

4. On-, re-, and near-shoring

“If the past few years have taught us anything, it’s that our traditional supply chain thinking — specifically how and where products are sourced, manufactured, and distributed — fails in the face of severe disruptions,” according to business consultancy AT Kearney. Covid-19, grounded cargo ships, container shortages, weather, labor strikes, and war have, at times, paralyzed global supply chains. Reshoring manufacturing is widely seen as a solution.

The US and EU governments are incentivizing chip manufacturers to settle in those regions. Onshoring will help reduce IC supply risk from a geopolitical standpoint, said Simon Ellis, head of IDC’s Manufacturing Insights and Global Supply Chain Strategies practices. “From a strategic perspective, we should have semiconductor manufacturing capacity in the US,” he said. “There’s no better crystal ball pertaining to risk than the trouble with Russia, and it would be no surprise if China is next.”

Experts say reshoring/nearshoring is vital to building more resilient supply chains that can recover more quickly from disruption. Manufacturers can incorporate and leverage models where components and materials supplies are nearshored and assembly is completed at the point of sale. This enables US manufacturers to source a portion of their materials and components in nearby locations like Mexico, Central America, and even Canada, said Kearney, while still being able to say their products are manufactured in the United States.

5.Sustainability

Sustainability is now a priority for the tech industry and spans several dimensions. The first is the circular economy, which gauges a company’s impact on climate and the environment. Then there’s sustainable supply: the long-term viability of vendors, on-hand inventory, and dependable logistics. Many electronics companies are designing products based more on component availability than on price or performance.

Sustainability must be part of the way the supply chain is run rather than a CSR initiative, said IDC’s Ellis. “That means operating with sustainability principles in mind, not just regulatory or reporting requirements. For example, much of the US is in a drought right now. Companies looking to expand should consider reducing their water usage. If supply chains are entering a protracted period of resource constraints — and there is certainly evidence to suggest that is the case — then sustainable supply will be a critical element of successful companies.”

The circular economy is gaining ground in the tech industry, Gartner noted. “Companies such as Cisco, Lenovo, and HP are redesigning their broader business models away from the periodic sale of discrete pieces of equipment to service-based models that include the responsible collection, recycling, and disposal of end-of-life products.”

Increasingly, electronics OEMs are auditing their vendors for social impact and sustainability. Forty-one percent of businesses said their organization has engaged a new supplier based in large part on environmental performance, according to Crowell and Moring, an international law firm. Thirty-one percent said their organization has fired a supplier based in large part on environmental performance.
Historically, transformation hasn’t happened quickly in the high-tech supply chain. But disruptions—both natural and manmade—have accelerated in recent years. Businesses are determining partnerships based on environmental, social, and governance (ESG) initiatives. Rethinking the supply chain now would set the stage for the next 50 years.