Is Your Company Prepared for the Next Phase of the Industry Cycle?

How to Navigate the Next Phase of the Industry Cycle

For almost three years, the semiconductor industry experienced the perfect storm—a combination of the longest, deepest, and widest period of shortages in its history. None of the expert industry analysts accurately identified this unique combination, and the chances of doing so correctly next time are slim to none. Just like the equity market, it’s almost impossible to precisely time the peaks and troughs of the industry cycle. Given that, the best approach is to “have the right strategy in place” for whenever the next phase of shortages or allocations hits—regardless of how long it lasts or how wide its impact.

Over the last 18 months, many manufacturing companies may have fallen into a false sense of security. Good availability, short lead times, stable or reducing prices, and declining inventories (after an initial build-up) have resulted in fewer supply chain and factory production issues. However, this calm is temporary. Just as night follows day, disruptions will inevitably return.

Many key indicators are already flashing amber: global economic growth driven by AI “buzz”, increasing capacity utilisation, decreasing inventories, and extending lead times. Although we can’t predict exactly when, it’s clear that we are moving ever closer to the next phase of the industry cycle.

What Do World-Class Manufacturers Do to Minimise Production Shortages and Line Stops?

The key is having a robust, yet flexible and responsive supply chain. There are many aspects to achieving this. Below are five essential elements world-class manufacturing companies rely on to safeguard against disruptions:

Five Key Elements of a Resilient Supply Chain

1. The Right Supplier Base & Strategic Share

Manufacturers, franchised distributors, and independent distributors should all play a strategic role in your supplier base. Having the right mix ensures diverse sources and reduces risk.

2. The Right Procurement Sourcing Strategy

Clearly define how demand is awarded to your suppliers—by technology, manufacturer, part code, or other parameters. This ensures flexibility when the market shifts.

3. The Right Logistics/Service Model

Your logistics model should account for both your overall needs and individual part numbers, such as supply-to-line, Just-in-Time (JIT), buffer stock, Kanban, or in-plant stores. This model should also cover all phases of your product lifecycle—from design and new product introduction (NPI) to volume production and obsolescence.

4. The Right Financial Model

Financial considerations such as payment terms, volume rebates, and inventory holding are critical to maintaining supply chain flexibility without adding financial strain.

5. The Right Strategic Multilevel Relationships & Communications

Building strong, multilevel relationships with suppliers is crucial. When disruptions occur, you need to be able to make that critical call, knowing that your partners will be ready to respond with the necessary network and influence to support you.

Tailor Your Strategy to Your Business

These five elements apply whether you’re an OEM or EMS, a global manufacturer with multiple locations, or an SME based in one country. What’s critical is having the right strategy tailored to your unique business. Just as no two bridges are identical, no two supply chains should be the same. Some strategies may differ dramatically, while others may have more similarities, depending on each company’s needs.

Prevention is Better Than Cure

 Now is the perfect time to scrutinise your supply chain strategy. Is it robust, flexible, and responsive? Ensuring your strategy is solid now will put you in a stronger position to handle the next phase of the industry cycle, whenever it arrives.

If you’d like to explore how Rebound Electronics can support your strategic supply chain, please contact us. We’d be delighted to help you develop a strategy that ensures your business is ready for whatever comes next.