Maintaining the Flow: Supply Chain Management in Challenging Times

Yes, this blog post is about Supply Chain, possibly the most overused phrase in the world over the past couple of years. In fact, earlier this year, “supply chain” had the dubious honor of being included in Lake Superior State University’s Banished Words List, an annual list compiled from submissions sent from around the world. That being said (another phrase on the list), there’s no avoiding “supply chain” talk, even two-plus years into our new normal (another one!).

Back in our carefree pre-pandemic world, supply chain management wasn’t something the average person used to think about too much. Most of us have become used to the availability of what we want, when we want it, and scarcely give a thought about the huge logistics machine that placed those goods in a timely fashion at the point of sale, or how the machinations of global commerce might affect it. That is until it goes wrong.

The effects of the COVID pandemic, plunging truck driver numbers, spikes in demand for certain items, and changes in international tariffs—notably a rise in Chinese tariffs—have combined to create a “perfect storm” for the logistics sector, leading to supply chain difficulties in many industries. Moreover, suppliers that have lost employees during the pandemic are finding it difficult to replace them with high-caliber staff.

Shortages in the electronics sector

One of the most impacted sectors over the past couple of years is the electronics industry, where electronic integrated circuits (ICs) have been and continue to be highly constrained. There are a limited number of fabricators, and they cannot cope with the current uptick in demand. It takes years and huge expense to increase capacity, and there is no assurance that the demand spike will continue, with the result that a new plant may be left without work long before it is ready to begin production.

The recently passed CHIPS Act, focusing on US-based investments in the semiconductor industry, was widely hailed as an important step towards end-to-end US chip manufacturing, innovation, and security, vital to the national defense. However, the day to day impact won’t be felt for quite some time.

For our customer base and users of our rugged computing solutions, on-time and consistent delivery is critical for program and mission success.

What is Systel doing?

Like everyone else in the industry, we consistently face supply chain headwinds including critical component shortages across the board, abrupt end-of-life (EOL) notices without guarantee of form-fit-function (FFF) replacement options, and overall massive unpredictability with multi-year lead times common.

While we don’t have a magic bullet, we have put in place several enhanced strategic supply chain management measures to insulate our customers against the effects of the shortages.

First is bringing it forward. We routinely look to procure components from distributors at a much earlier stage in our product development cycle. A “just-in-time” model is extremely difficult to rely on in the current supply chain environment; thus, we are constantly assessing the marketplace and acting as proactively as possible to secure material to mitigate risk.

Our engineering team is constantly reviewing our board and product designs, moving quickly to design-in alternatives parts as dictated by the supply chain winds, while ensuring revision control and customer approval and/or notifications per agreed upon terms and conditions.

Through our robust EOL systems and management tools along with our strong technology partnerships, our sales and purchasing teams are able to remain vigilant and get ahead of EOL issues, alerting our customers and working with them and our engineering team to spec or design-in appropriate alternates.

We regularly conduct backlog reviews to identify and triage the most critical shortages. An early indication of an possible component availability issue means that we can reach out to the supplier, and their suppliers and so on down the supply chain, for solutions long before the shortage becomes critical-path and delays delivery to our customer.

Addressing the counterfeit issue and building close supplier relationships

Counterfeiting goes hand-in-hand with supply chain shortages as unaccredited producers seek to fill the gap with cheap-to-produce, sub-standard items. Stringent counterfeit mitigation measures must be taken to ensure product reliability. Systel is a member of the U.S./Canadian Government Industry Data Exchange Program that shares information regarding counterfeit goods when they are detected, alerting members to their presence in the market.

We work with authorized suppliers and distributors on our approved vendors list (AVL), but when needed, we go to vetted brokers that can source the constrained items. We have in place strict traceability, brokered parts, and counterfeit parts protection processes in adherence with AS9100 to ensure component authenticity and reliability.

We enjoy long-standing and close relationships with numerous suppliers, and regularly engage with new suppliers who can provide new technologies, greater efficiencies, or simply act as another possible supply source. All potential new critical suppliers are subjected to our quality assessment processes. We also conduct regular audits of our key suppliers.

Trust is vital and our successful track record of providing end-to-end supply chain of custody and vetted supply chain management has provided our customers with trust in the reliability and security of our products in these uncertain times.

For those keeping count, we managed to use “supply chain” fourteen times in this post (fifteen times if you include this sentence). 😊

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