07 Dec 2023 -

Shift in electronics supply chain: from scarcity to surplus

The electronics industry is currently navigating a significant shift from a period of shortage to a surplus of inventory. Initially, the pandemic-induced component shortages led to panic-buying, resulting in a massive $250 billion glut in the U.S. electronics inventory. This situation was exacerbated by extended lead times and increased consumer electronics purchases during lockdowns.

The industry, though familiar with the boom-bust cycle, was unprepared for the scale of these disruptions, particularly the semiconductor shortage. This has raised concerns about future demand spikes, especially with the growing need for electric vehicle batteries and AI-powered technology.

To effectively manage this volatility, the industry needs to focus on accurate forecasting and data-sharing, leveraging tools like AI and machine learning. This approach will help in planning and avoiding issues like poor order batching and erratic pricing. Moreover, embracing automation is crucial for handling inventory more efficiently, with robotics playing a key role in cataloging and managing stock.

Understanding customer priorities is also vital. Insights into changing shopping behaviors, such as hesitancy towards luxury purchases due to inflation, and values-based trends are essential for predicting demand accurately. For instance, the electronics industry can learn from cases like Old Navy’s inventory glut, where a lack of sales data for new inclusive sizes led to excess stock, to better understand the impact of customer values on purchasing decisions.

Kearney suggests several near- and long-term actions to manage inventory levels, including setting up an inventory war room, enhancing visibility, adjusting supply chain models, and improving forecasting capabilities. While excess inventory benefits consumers through lower prices, manufacturers and suppliers may face financial losses. Therefore, rationalizing demand signals and improving data-sharing is crucial for the overall health of the electronics ecosystem.

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For more help with looking at supply chain options, contact Astute Electronics

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