Are you constantly keeping track of your component supply chain and bill of materials, trying to keep your production going? Are you currently making a design, unsure if you will be able to put it into production? Are you in doubt of starting a new design? In this perspective we share some lessons learned, obtained while dealing with these component shortage problems in our projects.
At Verhaert we are helping our customers to innovate and develop their product portfolio. We have designed and developed more than 1000 products since 1969. Bringing a product to market is not a walk in the park and involves many aspects. One of these aspects is arranging the supply chains delivering the right components at the right time to be able to assemble the electronic boards in your product.
Due to global material and component shortage, specific electronic components can be very hard to come by these days. This situation introduces an extra risk in the product development cycle that must be handled.
The effect of component shortage
Like every other business, we at Verhaert also got affected by the events that happened around us and the rest of the world. Not being able to source desired and necessary components for development can lead to market introduction delays, possibly missing a window of opportunity. In production however, this may very well lead to a complete production stop, with potential customers moving towards your competitors. Multiple examples exist of companies that have products on the market for years, where the production has halted from one day to another, because they cannot source $ 0.3 components. Also the launch of new products is accompanied with a struggle to ramp up the production. Everyone ordering a new (electric) car, or e.g. a PlayStation 5, will know the problem.
It is generally known that the cost of change rises exponentially with the made development progress. It is not worthwhile tackle product risks such as feasibility late in the development process. If you know sooner that a concept can’t work, you will have lost less money on this concept. This means that the size of the changes normally reduces with the progress that you make. This is illustrated in the figure below.
Figure 1: The further the product is in the development, the more difficult it is to change fundamental parts
Now what is the effect of component shortage on this product development process? The component shortage is an unexpected occurrence, striking beyond your control, that forces you to perform such an undesirable design change. This leads you to take a step back in the development cycle, resulting in a higher cost and longer timing, and can even lead to a full stop in production. As component shortage may occur at any moment within the product design phase – and even when the product is on the market – and in any part of your product, this is to be treated as a project risk with a reasonable occurrence rate and a high severity level.
How can we deal with this project risk?
In the process of bringing to and keeping a product on the market, we deal with project risks, and this is no exception to this. How can this (partially) be mitigated? During the previous years, we encountered some component shortage difficulties, and devised some methods to deal with these. The application of each of these possibilities depends on the development phase the product is in and on the envisaged production size. In the remainder of this perspective, these risk mitigation possibilities will be explained, and some practical examples are given for clarification.
1. Risk analysis
The first step when dealing with risks is to make a risk analysis. During the phases where technologies, parts and components are selected, a component shortage risk analysis needs to be made. During this risk analysis, we indicate where there can be a possible problems in lead time and unavailability. This seems to be a lot of work, but this is actually an extension on the exercise to find if there are multiple suppliers for the same component.
How do we tackle this in practice? We perform a risk analysis to find multiple suppliers and add the regular lead time to the equation. For components where we see little alternatives, and with large lead times, it may be better to change this circuit. During the initial development phases it is the ‘easiest’ to change the implementation. The further in the development process, the more difficult this becomes.
It often happens that some parts seem ideal for the specific needs of a product. This also was the case in one of our projects. The lead time was more than one year however. This was the reason why alternatives were found and adjustments were made in the production prototype phase. This resulted in a more robust circuit from component shortage point-of-view.
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