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3 Supply Chain Trends in the Electronic Component Industry to Focus on in 2019

Supply chain trends are constantly evolving. From initial manufacturing assembly lines to today’s advanced robotic, automation and IoT manufacturing solutions, the global advancement in efficiency levels has been increasing at a rapid rate. This constant improvement has not been any different for the procurement officers in the niche industry of electronic components. 2018 was a strong year for the electronic component distributors and manufacturers, reaching double digit percentage growth. On the other hand, 2019 is not looking as optimistic, with some of the largest catalog distributors reporting the slowest 6 months in the past 10 years as far as the sales of semiconductors go. To stay on track and continue to deliver growth year-over-year, companies must continue to learn and improve their supply chain and procurement practices.

3 Supply Chain Trends in Electronic Component Distribution

1. Using ever-evolving SaaS technology as a tool to improve the sourcing requirements.

Technology development is a major driving factor to becoming more efficient. Despite having many sophisticated tools to make procurement of components easier, companies still fail to invest in technology. Today, many OEMs still depend on calling multiple approved vendors for quotes and have them compete on the price and the lead time. This process can take days, if not weeks at a time. Now, imagine how long would it take to quote a 10,000 item bill-of-material (BOM) manually? Besides the quoting process itself being long, it is also difficult to manage many stocking distributors who cannot quote all the parts on the BOM and fulfill it completely. As the result, the OEMs need to deal with issuing multiple purchase orders (POs) to multiple vendors and factor in various lead times and dock deliveries. This buying process can delay production significantly if not managed properly. To tackle this obstacle, our team at Sourcengine created a sophisticated BOM tool to help companies manage their buying practices better. Buyers can now issue 1 PO for an entire BOM and receive 1 shipment delivered to their dock. Sourcengine’s BOM tool can also quote an entire 10,000 line item BOM in approximately 1 minute while enabling the buyers to only see the parts that meet their target price while integrating with the OEM’s ERP system through an API/EDI data transfer solution.

Sourcengine.com BOM Tool
Sourcengine.com BOM Tool

"The ever-evolving technology is simply making the jobs of buyers less stressful,” The Hackett Group states in its report. In fact, 30% to 40% of buyers say that digital transformation has a “high impact in achieving enterprise objectives, enhancing performance, optimizing the service delivery model, and addressing roles, skills profiles, and needs,” according to The Hackett Group report.

2. Implementing Artificial (AI) Intelligence into supply chain processes

When discussing the use of AI in the supply chain, we mostly focus on various segments in improving the operations of warehouses and shipping departments. Many companies are starting to implement gesture and voice-recognition systems for data processing over keyboard and mouse data entry. This process can speed up the way warehouse workers are pulling and placing the components from the shelves. Companies like Lucas Systems have taken the initial approach to make the jobs of warehouse staff efficient. Based on their research, the implementation of AI into warehousing has significant benefits to operating with less margin for error.

Improve productivity.

Depending on your process (e.g., full case picking from pallets vs. piece picking from flow racks), productivity gains may range from 10-90%. Lucas customers have achieved average picking productivity gains of 36%.

Reduce errors.

Even DCs with 99.9% picking accuracy before voice can reduce picking errors by 25% or more with voice picking.

Ensure Safety.

Because operators are eyes and hands free, they are more aware of surroundings. Operations that add voice solutions often see a decrease in accidents.

Decrease Training Time.

Voice-directed processes are more intuitive for users. Most Lucas customers find that a new associate can be trained and begin going solo in less than a day and become proficient in one to two weeks.

Lucas systems warehouse with voice direction
Lucas Systems AI Voice Directions

Artificial intelligence is also a leading factor in the creation of autonomous vehicles (self-driving cars), designed to navigate without human input. Companies like Uber and Tesla are leading the industry with their innovative vehicle driver-less approaches. Of course, the industrial self-driving machines are also advancing. The world’s largest retailer, Walmart uses self-driving vacuum cleaners to clean the store isles. These vacuum cleaners are made by San Diego based Brain Corp.  A warehouse worker can now program the vacuum cleaner in advance and send it off to its cleaning route. Besides cutting the amount of time it takes to clean the floors, the companies can now allocate their warehouse and floor staff to perform various jobs where human input is much more needed.

“At Brain Corp, we envision a world where the lives of people are made safer, easier, more productive, and more fulfilling with the help of robots. Such robots will be as commonplace as computers and mobile phones are today.” - Dr. Eugene Izhikevich - Co-Founder, Chairman & CEO.
Brain Corp elf driving vacuum cleaners
Brain Corp Self-driving Vacuum Cleaners

The perception of robotics and automated manufacturing systems is broadly implemented in the supply chain. Nowadays, the machines are easier to program, more flexible and affordable. Their role is to assist workers with repetitive and physically challenging tasks.

3.Obsession over positive user experience (UX)

Besides well-known catalog distributors of electronic components, many smaller niche houses are placing significant value on how the UX is affecting their brand. In talking to our participating sellers/vendors on Sourcengine, we found that many distributors are trying to constantly improve their customer user experience. Whether that is by offering discounts and other product price incentives, building e-commerce platforms on their website, reducing the number of clicks throughout the checkout process or trying to improve their quoting process, there is no excuse for not providing a wonderful user experience. Even large distributors are continually innovating. During the 2019 EDS Summit in Las Vegas, Dave Doherty of Digi-Key stated: “We are always on a digital acceleration. We have been on a digital path since 1996 and there is no embayment to that.” As the result, Digi-Key is focusing on providing a better user experience to their customers by introducing the image recognizer and the voice search for component shopping. “The user experience will undergo a significant shift in how users perceive the digital world and interact with it. The integration of virtual reality (VR) and augmented reality (AR) with multiple mobile, wearable, IoT and sensor-rich environments and conversational platforms will extend immersive applications beyond isolated and single-person experiences”, according to Gartner.

With all the innovation given to our society in the 21st century, the supply chain executives can focus on utilizing sophisticated tools to reduce costs and minimize the amount of redundancies during the order processing cycle. From SaaS shopping and order processing tools, wearable and voice technology, to automated warehouse systems for picking and re-stocking parts, there is a way to constantly improve our supply chain practices in the electronic component industry. The technology is here, it’s time to roll up the sleeves and implement it.

References:

https://www.thehackettgroup.com/supply-chain-strategy/

https://www.lucasware.com/voice-picking-introduction/

https://www.braincorp.com

https://www.gartner.com/smarterwithgartner/immersive-technologies-are-moving-closer-to-the-edge-of-artificial-intelligence/

https://www.sourcengine.com/sell

https://www.digikey.com/en/resources/events/2019/2019-digi-key-eds-business-update-thanks

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