Disruptions and uncertainties to the global supply chain are set to continue in 2023, as inflationary pressures, geopolitical conflicts, climate change and shortages of raw materials continue to cause impact to the flow of goods to the final destination, amid other imminent issues and challenges that have yet to surface.
According to a recent HID survey, 74 percent of respondents were impacted by supply chain issues in 2022, with half of them unsure whether things would improve in 2023. Most affected were commercial real estate companies, with 78 percent citing supply chain problems as their main concern.
And although organisations in the healthcare industry were relatively less affected by supply chain issues in 2022, they were concerned that these problems would continue into 2023.
The global impact of semiconductor shortage
Microchip shortages and a surge in order placement and fulfilment have led to supply chain issues in the manufacturing sector, as lengthy lead times pose interruptions and disturbances to projects and programmes.
A persistent problem is the shortage of semiconductors, also known as integrated circuit chips or IC chips. Semiconductors power nearly everything in our digitally driven world and have become the backbone of security and identity components including readers, control panels, sensors, detectors, credentials, passports and peripheral devices such as printers.
Although chip shortages are subsiding, analysts predict that the global semiconductor shortage will continue through 2023, when they project semiconductor revenue will decline by 2.5 percent.
Factors contributing to the shortage were mostly linked to the COVID-19 pandemic. Subsequently, the globalisation of supply chains and vulnerable human-driven processes compounded the problem further, alongside labour and materials challenges. Predictions now vary on how long the shortage will persist.
Parts shortages impacting hardware design, manufacturing and distribution
A shortage of parts in the manufacturing and distribution of end products inevitably arose following the semiconductor shortage, which also affected hardware design.
Organisations consequentially redirected their entire hardware engineering teams to focus on rectification efforts, producing new printed circuit boards (PCBs) and printed circuit assemblies (PCAs) in the process as a result.
Such organisations are better placed to handle shortages in the short term as they have realised the need to devise additional options and solutions to diversify their product base.
With the improvement in component supply and leveraging products with newly incorporated chip sets, maintaining the capacity to build and distribute such products downstream is essential.
As an enhanced microchip supply emerged in the middle of 2022, companies have been working closely with contract manufacturers and distribution centres to ensure that the capacity to handle the increased product flow is available. They have also increased their expenditure and are encouraging their contract manufacturers to emulate them.
Companies expanded their provisioning workstations in their distribution centres and increased their headcount to equalise or surpass their capacities with their contract manufacturers. They have also been working diligently to acquire scheduled dates on their backlog with the improved supply lines.
Establishing communication with international partners and customers
A challenge in communicating extended lead times to customers sprang from the rising order backlog.
Satisfying the increased product demand to ensure fairness to their wide array of customers is paramount for companies, which have resorted to placing orders in the specific sequence received, with the exception for critical infrastructure projects such as hospitals and airports which rely on immediate product delivery.
With a stronger demand comes a spike in the volume of support inquiries for customer service personnel that had exceeded the capacity to sustain support. Extended e-mail and phone response times followed suit, resulting in teams toiling during weekends and evenings to provide exceptional service to a booming customer base.
To address the issue, some companies have invested in their customer service teams by boosting the employment of their representatives, contributing to a substantial decrease in e-mail response times and telephone responsiveness improving remarkably.
Moving forward
The global supply chain is still recovering from the aftermath of the pandemic. In order to navigate the disorder and maintain resiliency in 2023, organisations can turn to various countermeasures to address the challenges and trends.
These include engaging directly with chip suppliers to negotiate allocations, pursuing alternative sources through broader distribution networks, institute heightened inbound quality controls, undertake significant purchase price variance (PPV) and undergo multiple redesign efforts of end products.
More importantly, organisations must be able to not only identify what is changing but also take advantage of them and evolve with the current trajectory. They must have the capability to adapt faster, deliver exceptional digital and physical experiences and leverage breakthrough innovation in solutions and services, so as to stay robust and resilient to whatever challenges lying ahead of them.
By Kevin Teehan, Vice President, Strategic Services, HID
