Purchasing Department: "Having our own R&D at ALCAD has helped us to implement alternatives to the shortage of supplies of electronic components"

2022 will be remembered, among other things, for the crisis resulting from the shortage of supplies of electronic components worldwide. A critical situation for manufacturing companies such as ALCAD, which has forced our Purchasing Department to work in a situation of almost daily uncertainty. However, thanks to the dedication of the department and the collaboration with other areas of the company, we have managed to achieve reasonable delivery times.

2022 has been a hectic year for ALCAD's Purchasing Department, comprising Andrea Amenabar and José Luis Toledotxiki (see picture). The shortage of supplies of electronic components worldwide has been a real headache for the department responsible of ensuring that our factory receives all the components needed to produce the orders in our backlog.

What strategy has ALCAD followed to minimise the effects of the supply shortages? Did it take us by surprise or were we already prepared?

Andrea Amenabar: When I joined the Purchasing Area in October 2021, we were already suffering the consequences of supply shortages. Little by little, together with the rest of the team, we defined the necessary strategies in each case. The key has been to plan orders with a long-term vision to minimise the impact of the long lead times we are suffering.

José Luis Toledotxiki: When I arrived at ALCAD in November 2021, it was planned to launch orders one year ahead for most of the components planned in the General Plan. Although this mitigated the problem, the constant reconfirmations and supply problems forced us to reschedule production, reducing batches and incurring cost overruns. To answer the question directly, I would say that we were not taken by surprise, but we were not prepared to work with such long lead times.

Have you been able to deliver, and have our customers understood this?

Andrea: In general, sooner or later, we have.

José Luis: After a lot of hard work, we have been able to meet most of our commitments. To do this, we have had to meet assiduously with suppliers, look for alternatives and propose them to R&D or buy outside the usual supply channel (dealers or other suppliers), even though we have had to expose ourselves to cost overruns.

We do not have a direct relationship with customers to get their feedback, but the fact that the problem has spread worldwide (stopping sectors such as automotive, for example), has caused the media to echo the problem. This has made it easier to explain the situation to customers and for them to understand it.

What have been the biggest difficulties faced by the Purchasing Department this year?

Andrea: Most of the time was spent on analysing our needs and the (changing) confirmations of our suppliers over and over again. Thus, the objective has been to anticipate material shortages that we may have. Working in a changing scenario, this has been fundamental.

José Luis: When a manufacturer's deadlines go up to 80 weeks, as is currently the case with Texas Instruments, for example, we have to multiply ourselves: we have to talk to the distributor, the manufacturer, dealers, look for alternatives, consider the option of buying at other prices and, in the end, get the material, even if we have to wait a little longer than usual. The complexity comes when this is added to many other difficulties: transport problems, manufacturer stoppages due to pandemics, constant rise in raw material prices, an R&D area saturated with proposals to keep the production lines running, etc.

Has the fact that we are manufacturers and therefore have greater production flexibility minimised the effects for ALCAD?

José Luis: Of course; it is key because we have had to be very flexible in all areas of the company: R&D, Product, Sales, Finance... In Production, for example, they have had to manufacture much smaller batches than usual to meet customer orders, they have had to adapt to material that instead of reels has come in sticks, they have made efforts to select material when there have been batches affected by quality...

By having an R&D area, it has also been possible to redesign products that have critical components. How has the coordination between departments been?

Andrea: This question goes hand in hand with the previous one. Being manufacturers has been key to finding solutions. In this way, it has been possible to propose different alternatives, validate them and carry out redesigns in order to be able to continue serving products. In this process, the involvement of both R&D and Production has been essential.

José Luis: Coordination has been very fluid and within an empathetic environment. The best way to meet commitments is anticipation, constant communication and involving the Purchasing Department in the designs from the beginning. In this way, we are able to provide knowledge of these critical components in terms of manufacturer, deadlines, service history and costs. Analysing, in the product BOM definition phase, the life cycle of each of the components included in the design is key to avoid surprises of obsolescence, price increases due to purchase batches or service problems with certain manufacturers.

Will the situation improve in 2023?

José Luis: Let's hope so - we are already seeing that the prices of some raw materials are stabilising, thanks to the fact that demand from certain sectors is easing. During this period, moreover, manufacturers have made significant investments in order to increase their production capacities. There is also a feeling that there is a kind of bubble in the order books that manufacturers have, which are also gradually adjusting to real demand. All this should help to reduce lead times little by little.

However, there are currently several manufacturers who still have lead times of more than 52 weeks and who continue to systematically raise prices at present. This problem has been exacerbated by the fact that the €/$ parity currently stands at €1=$1.

Is there any positive reading to be drawn from this?

Andrea: We have learned to be more flexible and to adapt to the uncertainty that is here to stay.

José Luis: Of course we have. New accounts have been opened with suppliers and distributors to solve supply problems and, in some cases, to mitigate price increases.

Any questions? Please contact us. We will be happy to help you.