EMBRACING JUST-IN- CASE LOGISTICS The supply chain turmoil in the electronics industry has been particularly crushing for electronics manufacturing service (EMS) companies—the ones making goods for original equipment manufacturers. Because they sit in the middle of the supply chain, EMS firms feel the crunch from both sides. The best way for EMS companies to thrive today, according to recent thought leadership from Forbes Technology Council, is to embrace “just-in-case” logistics, defined as “relying on their own warehouses, stocked with excess inventory, to prevent shortages not only in finished products but also for spare parts and components” by Andreas Bubenzer-Paim, head of technology banking at Bank of the West/BNP Paribas. Bubenzer-Paim recommends EMS companies adapt using six tactical steps to get to a just-in-case approach: 1. Encourage customers to shift away from placing frequent, smaller orders. Instead, EMS companies should get their customers to place larger orders to improve chances of securing needed components. That way, EMS companies can, in turn, place their own larger, less-frequent orders with their suppliers. 2. Use robotics and AI to help overcome supply chain inertia. Automating manual processes and streamlining human- machine interactions can help reduce the pressure on supply chains, and couples well with just-in-case inventory buffers. 3. Diversify across the globe. Having financial partners with a presence in key countries and regions can help manufacturers stay ahead of disruptions and maintain supplier relationships. 4. Consider reshoring. Following the lead of giants like Samsung and Intel, EMS companies should consider building semiconductor factories in the United States to localize talent, recoup losses, and improve supplier-manufacturer relationships. 5. Seek alternate financing mechanisms. EMS companies with cash-flow difficulties may benefit from financing channels that don't require debt. 6. Provide shorter payment terms to suppliers. This helps ensure that suppliers are able to keep operating and providing the necessary components to the EMS industry.
A PIVOT TO PENANG Seeking to diversify beyond China for offshore manufacturing capabilities has been an ongoing strategy in the electronics sector—and Penang, Malaysia, is fast becoming a major player in the global semiconductor industry. Embracing the area recently is TTM Technologies, a Santa Ana, California-based manufacturer of printed circuit boards (PCB), radio frequency (RF) components and RF microwave/ microelectronic assemblies, which just broke ground on a $130-million manufacturing plant in Penang. TTM selected Penang based on the region’s favorable conditions for investment and operating costs, customer proximity, and supply chain support. Penang was also attractive, the company notes, due to its well-established electrical and electronics industry ecosystem. Penang is now estimated to contribute approximately 8% of the global back- end semiconductor output, boasting a network of more than 3,000 local suppliers, according to economic development booster organization, InvestPenang. “As an early-mover into Southeast Asia for the production of advanced technology PCBs, TTM is responding to our customers’ needs for supply chain resiliency, regional diversification and growth capacity,” notes TTM President and CEO Tom Edman. The new, highly automated plant will serve TTM’s global commercial markets including networking communications, data center computing, and medical, industrial, and instrumentation. Being built on 27 acres of industrial land at Penang Science Park, TTM expects to be fully operational there by 2025. $555.9 BILLION TOTAL GLOBAL SEMICONDUCTOR INDUSTRY SALES IN 2021—THE HIGHEST EVER, AND
26.2% HIGHER THAN 2020. –Semiconductor Industry Association
May 2022 • Inbound Logistics 17
Powered by FlippingBook