The Key to Surviving Component Shortages: Long-Term Storage

Anyone paying attention to the state of the electronic component marketplace knows that 2018 has seen the most significant industry-wide shortage in over a decade. Lead times for once-commoditized components and semiconductors are, in some cases, stretching well over a year, throwing many a supply chain into a state of perpetual uncertainty.

Many analysts are citing unprecedented demand in IoT, mobile, and automotive sectors as the driving force behind the shortage, but the fact of the matter is that understanding what caused the shortage does very little to help industry professionals now. Analysis can benefit us all in retrospect – but what manufacturers need now isn’t analysis, but proven, clear strategies that can be implemented immediately to support their current products.

The most obvious course of action is to bypass the need to deal with allocation issues entirely and stockpile the necessary inventory on the front end of the product’s lifecycle. To assume this is a reasonable option, however, is premature without also considering the OEM’s ability to store, handle, and fulfill the inventory for as long as necessary to complete the product’s anticipated life cycle. To implement such a robust infrastructure, as well as purchase the inventory at the outset of a new product design, significant working capital investment is required — working capital that many OEMs simply cannot part with within a single quarter.

Without the ability to maintain inventory long-term on their own, they must turn to supplemental services outside their own infrastructure – yet oddly enough, the industry has been slow to adapt quickly enough to fill this inherent market need. Authorized distributors, for example, can only hold inventory for approximately 12 months at a time.

Even if 12 months is suitable to bypass a 52-week lead time for a single component, this often comes with a caveat; authorized distributors, driven by a need to deliver high inventory turnover margins, are under no obligation to reserve inventory in a customer’s name. If an OEM in direct competition with you offers the distributor double the price upfront for the components in question, you run the risk of having your inventory bought from under you.

Where other offerings fall short, EDX Electronics’ long-term storage capabilities for owned inventory shine. Instead of restricting your window to a paltry 12 months for a single component, EDX offers customers a one-stop-shop where all of their critical inventory, regardless of quantity or type, can be securely stored for as long as required.

What we offer in terms of storage length, we more than match in terms of storage quality. In addition to maintaining both ISO:9001 and AS9120 certifications, as well as a dedicated staff with extensive training in inspection, ESD, and MSL packaging protocols, we also offer customers the option of storing sensitive, high-value components in a climate-controlled custom storage vault suitable for any kind of electronic component – including sensitive wafer and die. Just because we can offer storage capabilities for owned inventory without limits doesn’t mean we cut corners in our infrastructure to do so.

But, as previously mentioned, such capabilities are only usable to bypass a component shortage if you have the financial ability to commit to purchasing all necessary inventory the moment it’s required – not on an “as needed” basis. This is why EDX also offers a Last Time Buy Solution in conjunction with our storage abilities that allows us to purchase up to ten years’ worth of critical inventory on your behalf. This means all of EDX’s long-term storage offerings are available to customers, for up to ten years, without the need to sacrifice a dime of upfront working capital to do so.

In our own way, you might say that the solutions EDX offers are designed to help OEMs survive component shortages like the one we’re experiencing today. To see how we can help ensure the life cycle of your product, feel free to contact one of our supply chain strategists at solutions@edxelectronics.com.

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