Understanding Electronic Component Storage in the Wake of COVID-19By Logan Wamsley
The COVID-19 pandemic, for all of the fear and tragedy that it is responsible for around the world, has been equally disruptive in the business world. Long-standing strategies used for sourcing electronic components, semiconductors, and related products from distributors on an as-needed basis have suddenly hit a brick wall, and OEMs around the world are struggling to respond. As we enter into what many experts are declaring to be the “worst week” of the COVID-19 crisis yet, now presents a golden opportunity to assess what is currently going wrong and what strategies can be used to mitigate disruption should a similar crisis unfold in the future.
One such issue is the nature of electronic component storage, or rather how OEMs view it. Before the COVID-19 pandemic, on-site storage of critical electronic components was considered, at best, a luxury, and one that was out of the realm of feasibility. Although most manufacturers understand that having materials on-site can be a benefit, every square foot of space required for warehousing is square footage that can be used for manufacturing processes. OEMs must also take into account the expense required to keep such warehousing facilities suitable for storage of electronic components; on average, the annual carrying costs for electronic components can be as high as 25-30% the original cost of the part.
Unfortunately, most alternatives to onsite storage can be equally expensive. Contract manufacturers, should they have an option for component storage, are known to charge an average of 15% annually. Distributors, who are driven by a need to continually move inventory, have an extremely limited ability to hold inventory, and especially cannot do this when a competing OEM offers immediate upfront payment.
COVID-19, however, is presenting more than ever the need for some form of long-term inventory storage that will ensure continuous, unimpeded manufacturing processes. Without the option of onsite storage, the only remaining solution is to look to third parties for long-term electronic component storage, but not all solutions are alike. Location of storage facilities, for example, is key, as are the resources they have on hand to store sensitive electronic components such as ASICs or raw die and wafer. When determining a third-party partner to trust with sensitive electronic inventory, it is critical to understand beforehand where the inventory will be stored, what kinds of electronics are suitable for the storage solutions they offer, how long the storage terms offered can be, and if there are any limits in terms of inventory type or quantity.
In Partstat’s case, we offer best-in-class long-term electronic component and semiconductor storage for the most sensitive electronic inventory, up to and including raw wafer and die, within the United States. And unlike other storage solutions, there are no limits in regards to term, inventory type, or inventory quantity. Upon notice, Partstat will also handle all packing and shipping processes to ensure customer inventory is delivered in optimal condition at the moment it is required.
There is light at the end of the tunnel. One day, processes will revert back to a semblance of normalcy, but ideally, manufacturers will take the lessons learned in this crisis to heart so that the next global crisis is not as taxing. Rethinking long-term inventory storage, and the solutions available for manufacturers who struggle with it, is a good place to start.