Where Do Last Time Buys Fit into a Post-Silicon World
There are many variables that can result in supply chain disruption, from the assembly line all the way down to the acquisition of raw materials. Most recently, these disruptions have been primarily caused by a combination of escalating demand for capacitors, resistors, and discrete semiconductors, and a notable lack of investment into capacity by component manufacturers.
Driven at least in part by these struggles (as well as by a growing interest in more energy efficient technologies), a renewed focus has been placed into the research and development of alternative synthetic materials that, in theory, would at least somewhat mitigate the need for component manufacturers to confront disruptions at the raw material level. As recently as 2018, for example, prices of silicon metal and methanol, both key elements in the production of silicone, increased by 20-30 percent and 20-25 percent, respectively, due to the mass shutdown of several Chinese silicone plants in the wake of the country’s new environmental regulations.
Luckily, the scientific community has responded with a variety of recent innovations that, with time, could spearhead the next great leap in electronic component manufacturing. The University of Chicago has just produced one notable example; using advanced technology at the Argonne National Laboratory, a team studied a class of “superconductor” materials, or materials capable of conducting electricity perfectly with zero resistance. So far, however, these materials only display such characteristics under intense pressure (between 150 and 170 gigapascals) and extremely cold temperatures (currently around -73 degrees Celsius). While real-world applicability is still a few iterations away, scientists remain hopeful that these technologies will be able to maintain operation at room temperatures in the near future and immediately be applied in products such as supercomputers.
Price, of course, will initially be a significant barrier to more mainstream adoption once such technologies are viable — but once overcome, the implications for electronic component manufacturing, and its various supply chains, are incalculable. But with maintaining this line of forward thinking, another question remains: Will there be a role for current obsolescence management strategies in this radically new market where superior man-made materials can compete on an even field with natural materials (sometimes acquired from developing countries susceptible to various disruptions of their own)?
The answer is yes. Although risks related to obsolescence may become somewhat diminished, the financial benefits related to such strategies will remain relevant long into the future. A Partstat Last Time Buy Solution, for example, with its ability to purchase inventory direct from the component manufacturer, has preserved over $100 million in upfront working capital for our OEM customers. And due to reduced manufacturing costs associated with large bulk orders, a number of OEM customers also receive additional leverage to negotiate significant discounts on their critical inventory. Should the order in question be for newer technologies that by nature will feature a higher price point, such strategies will be invaluable for OEMs who wish to be early adopters ahead of their competition.
In short, while the supply chain is poised to radically transform as these new technologies enter into the market, basic, common sense strategies such as our Last Time Buy Solution have infinite lifespans. For today, tomorrow, and the immediate future, supply chain best practices will continue to be relevant and necessary for OEMs to maintain a viable place in their market.