How Data-Driven Insights Mitigate Risks

In the second part of our series on digitalization, we take a look at how digital solutions help companies in risk mitigation.

Digitalization is the next step in revolutionizing modern-day workflows and accelerating development and productivity. In the first part of Sourceability’s series on digitalization, we covered the importance of digital tools and their effects on the electronic component supply chain. The global supply chain is becoming more interconnected each year, and emerging technology like OpenAI’s popular ChatGPT will further expose the vulnerabilities of relying on traditional and manual processes.  

Part 1's main point of discussion and argument for digital transformation centered around the faults in manual procurement processes. One of the most significant flaws in traditional workflows is the reliance on manual data entry into lengthy Excel sheets. These processes are prone to human error due to various missteps, from outdated to improperly documented data. For bill of materials (BOM) management, digitized information, further aided by digital technology, makes this process smoother and severely limits, if not entirely erases, the worry of inaccurate information.  

Furthermore, digital tools in electronic component procurement increase operational efficiency for original equipment manufacturers (OEMs), electronic manufacturing service (EMS) providers, and contract manufacturers, but also original component manufacturers (OCMs). Similarly, decreasing reliance on just-in-time (JIT) scheduling and manufacturing improves procurement workflows immensely. If JIT methods are overused, it tends to increase the chances of disruption. As an example, JIT over reliance exacerbated the growing global 2020-2022 chip shortage.  

Monitoring the global supply chain, market shifts, possible disruptions, and sourcing electronic components is a colossal task. Manual workflows require dedicated teams and countless hours of tedious, often repetitive work to monitor a small portion of the electronic component market. The amount of data generated daily constantly fluctuates, and organizations must re-evaluate, re-examine, and update previous data due to unexpected shifts. Essential insights are often lost or overlooked.  

How Manual Processes Drive Inaccurate Data

Today's electronic component supply chain is a behemoth that only grows larger by the day. After several years of explosive growth, thanks to the global chip shortage, it is positioned to become even larger. Several countries are passing incentive plans to fortify domestic chip supplies encouraging many OCMs to expand their global footprint.

While this hopefully means more supplies and diversified sources in the future, it further adds to the necessity of addressing the current problems with manual workflows. The level of market monitoring necessary for tomorrow’s supply chain will be more intense than before. Products require more components, and securing supplies and keeping watch for dramatic shifts will be harder

Traditional market monitoring requires dedicated teams with hundreds of Excel sheets, like procurement. These lists can be several thousands of components long for a single product assembly. The monumental amount of time this process takes usually leads to a limited view of current market conditions, due to tight deadlines.

An example of how traditional workflows fail can be seen with the global 2018-2019 MLCC shortage. In 2017, the electronic component industry was on the precipice of an oncoming influx of orders. Multilayer ceramic capacitors (MLCCs) were rising in use within automotive applications. Demand for MLCCs was rapidly outpacing existing supplies. OCMs prepared to raise production capacity, but they couldn’t cover 60% of the global market value held by Samsung Electro-Mechanics, Murata, and Taiyo Yuden.  

A year earlier, Murata and TDK announced the discontinuation of several MLCC lines. By 2018, the discontinuation would be official. As MLCC use increased in automotive sectors, huge last-time-buys (LTBs) occurred post-component end-of-life (EOL) announcements. Then, in 2019, Samsung, Taiyo Yuden, and Walsin pulled back from large case-size MLCC production, placing a tighter chokehold on the existing MLCC supply. As a direct result of these contributing factors, an MLCC shortage began.

This challenge could have been mitigated before it evolved into a shortage of digital market intelligence tools. By watching MLCC demand increase in other market sectors, and proactively searching for form-fit-function (FFF) alternates, drop-in replacements (DIR), or equivalent electronic components rather than waiting for last minute LTBs, the MLCC shortage might have been turned into a small hurdle rather than a global shortage.  

Digital technology, such as artificial intelligence like predictive analytics, could have alerted industry members of a possible shortage from constrained MLCC supplies. Additionally, digital case management applications could have aided those in strategically formulating a plan on how to manage oncoming obsolescence through redesigns or component replacements properly. Finally, a digital market monitoring tool could have alerted manufacturers to the risk associated with a part, whether it was sole source or not recommended for new design (NRND) long before the EOL phase was announced.  

Digitalized Processes and Their Benefits

One of the first benefits a company can gain by using digital technology and digitized data is accessibility. Digital tools often present data-driven insights free of clutter and unnecessary information, cutting back on the time needed to understand a situation and act. For some market intelligence tools, data can be presented in simple-to-understand scoring systems with additional insights if a more profound understanding is necessary. Within the electronic component supply chain, digital technology combined with artificial intelligence algorithms can quickly find and present data on design risk, price trends, inventory trends, market availability, and multi-source availability.

These five data areas are pertinent to procurement teams, engineers, and other organizational levels. Real-time market data paired with historical transactional data often feed these digital scoring systems, helping years and years of data be condensed into a simple score. This data is free of human error, usually found in manual processes, and updated timely as the market shifts. Without inaccurate or outdated information clouding judgement, teams can make more informed decisions and strategies with faster responses leading to increased optimization.  

Similarly, predictive analytics goes beyond traditional demand forecasting by combining upcoming market shifts with alerts to possible disruptions. Combined with machine learning (ML) technology, the market tool grows more accurate as it continually “learns” from collected data. Predictive analytics programs consider several factors but primarily study data on raw material availability, consumer behavior, sales data, weather conditions, logistics, and historical trends. Through pattern recognition, predictive analytics determines the likelihood of breakdowns along the supply chain and which components are prone to future risks.  

Overall, this level of market monitoring reduces risk and cost, improves operations, and increases revenue while providing greater flexibility for faster decision-making. For those that stick with traditional supply chain monitoring, the gap between them and companies with predictive analytics is immense. The real-time forecasting capabilities simply outpace any traditional method.  

Likewise, predictive analytics and market monitoring don’t just forecast gloom and doom on the horizon but also growth. With these insights, manufacturers can increase their market position by strategizing for noted growth opportunities. Awareness of supply chain pain points and component disruptions can aid engineers during product design phases, making them more resilient to possible shortages. Or, if necessary, removing sole source components and locating a stable line of available, active alternates if one could face EOL in the future.

A marketing tool that accomplishes these tasks and delivers improved benefits is Datalynq.

Your Digital Market Intelligence Tool

Datalynq is the digital marketing tool for the electronic component supply chain. Using real-time market data from the leading e-commerce site in electronic components, Sourcengine, Datalynq provides supply chain visibility based on data from actual market trends. It accomplishes with its market monitoring system, predictive analytics, digital case management, and comprehensive product information.

These capabilities and real-time market data from a commerce site with over 1 billion offers help provide highly accurate insights based on oceans of historical transactional data. This allows organizations to better understand the accessibility of a part and its price shifts over time.

As a result of material shortages, logistics challenges, geopolitical volatility, natural disasters, and accelerated obsolescence, components can widely vary in availability and price.

Likewise, since obsolescence is a massive supply chain threat, Datalynq offers case management capabilities to organizations ready to document their next steps. Case management documentation is necessary for some strict industries, such as healthcare and defense. To further increase time optimization, Datalynq’s case management is formatted to follow the Department of Defense’s (DoD’s) DMSMS SD-26 or DMSMS management process. While only stringent industries require complete documentation, following the case management’s easy-to-fill digital guide gives all manufacturers the capability to strategize for obsolescence, loss of manufacturing sources, and material shortages quickly.

Datalynq’s overall presentation of pertinent information is simple and streamlined, so users don’t have to sort through the same mountains of data. Price and inventory insights are critical to supply chain momentum, so lead time, inventory, pricing, and shortage patterns are revealed quickly with regular updates on parts and assemblies. Datalynq’s predictive analytics shows demand changes for FFF alternates, so users are always aware of possible changes.  

These are just a few benefits manufacturers, and EMS providers can look forward to when using Datalynq’s digital applications.  

Sourceability’s Continued Race Toward Digital Innovation

Alongside Quotengine, Datalynq makes up another piece in Sourceability’s digital tool suite. Due to the vastness of the electronic component supply chain and the need for complete visibility, Datalynq is Sourceability’s digital magnifying glass for all sectors of this global giant.

Datalynq goes beyond simple market intelligence by providing predictive analytics, case management, and component scoring solutions. In the future, Datalynq will be able to provide further transparency into component histories and risks within the evolving global supply chain.  

Digital transformations will place many organizations' leagues ahead of the competition, especially when they know just exactly where and when disruptions and opportunities will occur. Even OCMs are transforming the way they create the very components we use through artificial intelligence and digital technology. During this demand slump, now is the time to initiate plans for a digital transformation.  

In our third and final part of this digitalization series, we’ll look at how you can benefit from integrating your enterprise resource planning (ERP) system with an e-commerce platform.

Author of article
Kathryn Ackerman
Kathryn Ackerman is a senior copywriter with experience in the electronic components and tech industry. She works alongside Sourcengine's experts and engineers to provide the latest and most accurate updates within the electronic components industry.
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